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Clearing & Settlement


All Clearing members of NSE Clearing including Banks and Custodians referred to as 'Participant' are eligible to participate in SLBS. In order to participate in SLBS, clearing members have to register as Participants in SLBS.

For this purpose, the eligible persons are required to follow the registration procedure as specified by NSE Clearing which includes entering into an agreement with NSE Clearing as per the format specified.

Participants desirous of lending or borrowing securities can do so either on their own account or on behalf of their clients. Prior to undertaking lending or borrowing of securities on account of clients, the Participants are required to enter into an agreement with each client as per the format specified by NSE Clearing.

The Participant need to apply to NSE Clearing for allotment of a "Unique client ID" for each client with whom they have entered into the agreement for participating in SLBS.

The formats of Agreement between NSE Clearing & Participant and Participant & Client along with the procedure of UCI allotment to clients is available in SLB Circular NSE/CMPT/10164 (Ref. Circular No: NSE Clearing/SLBS/2008/002) dated January 30, 2008.

Currently, securities available for trading in F&O segment of National Stock Exchange of India Ltd. (NSE) are permitted.

Securities lending and borrowing is permitted in dematerialized form only.

Securities in which there are corporate actions are subject to either foreclosure of transactions or adjustment depending on the type of corporate action.

The eligible securities for early recall/repayment are announced by NSE Clearing along with the list of eligible securities for SLB.

Securities Available for Borrow / Lending (.csv)

The tenure of lending and borrowing ranges from 1 month up to a maximum period of 12 months.

Accordingly the return of securities by borrower is scheduled on the respective reverse leg settlement day. Each reverse leg settlement date is assigned a specific series number.

In case the lender wants to recall the securities he has a facility to place a RECALL order on the order matching platform. The relend order should be for same series/security and for the same client. The lending fee for the balance period is at market determined rates hence the lender needs to quote the lending fee he wishes to forego for the balance period. The RECALL order can also be placed at market order.

The lender can only enter a RECALL request if he has existing reverse leg positions. The recall request can be made for partial quantity.

In case the early recall transaction is for a custodial participant, the custodian transaction has to be confirmed as per existing procedure for custodial transactions.

In case the borrower wants to repay the securities and further relend them, a facility to place a REPAY order is provided on the order matching platform. The relend order should be for same series/security and for the same client. The lending fee for the balance period is at market determined rates hence the borrower needs to quote the lending fee he expects for the balance period. The RECALL order can also be placed at market order. In case the early repayment transaction is for a custodial participant, the custodian transaction will be automatically confirmed by NSE Clearing and the securities transferred in NSE Clearing repayment account will be automatically utilized. Before the market places a REPAY order, the borrower has to first make an early repayment of securities in the repayment account prescribed by NSE Clearing. The procedure for transfer of securities is attached as Annexure.

Download ANNEXURE (.doc)

Clearing:

All obligations are on a gross basis i.e. there is no netting of transactions. Where the participants have transacted for their client or on their own account the obligation arising out of such transactions will be on the Participant. However, where participants have transacted for a Custodial Participant (CP) client the transaction is subject to confirmation of the respective custodian and the obligation will be on the Custodians. However, non-confirmation of such transactions by the Custodian will revert the transaction to the participants obligation. Obligations for the first leg are downloaded to participants/Custodians on the T day and obligations for the reverse leg are downloaded on T+1 day.

The first leg of the transactions across all series including early recall/repayment transactions are settled on T+1 day on a gross basis.

Transactions under SLBS segment are identified based on different settlement types as intimated by NSE Clearing for the first leg and reverse leg settlements. Early recall and repayment transactions will be identified by separate settlement types in the obligation file.

Early recall transactions would require custodial confirmation whereas early repayment transactions will be automatically confirmed by NSE Clearing.

Lender's Obligation: The lenders obligation is the securities lent on T day (Transaction date). The lender is required to deliver the securities by the scheduled time on T+1 day.

Early Recall Obligation: In case of early recall the lenders obligation is the lending fee which is transacted for the early recall transaction and is payable on T+1 day.

Borrower's Obligation: Borrower's obligation is the lending fees in cash form and the lending price (T-1 day closing price in the underlying security) in cash collaterals payable on T+1 day.

Early Repayment Obligation: The securities transferred by the borrower shall be automatically utilised toward the respective pay-in.

Settlement Procedure:

The pay-in and pay-out of funds and securities is through the designated bank accounts and securities settlement account respectively. Transactions are settled on a T+1 day basis for the First Leg, Recall request & early repayment for all eligible series. Transactions are settled on reverse leg settlement date of the respective series.

The bank account currently used by Participant for settlement of funds in the Capital Market segment is the designated bank account for giving effect to funds debits/credits under SLBS.

Participants are required to maintain accounts with both depositories i.e NSDL & CDSL. The pool account currently used by Participants in NSDL for effecting securities pay-in and pay-out in the Capital Market segment is used for settlement under SLBS.

In case of CDSL, Participants are required to open a separate settlement account for effecting securities pay-in and pay-out under SLBS.

Participants / Custodians have been provided the facility of crediting the payout of securities directly to clients account. In order to avail of this facility, participant/custodian are required to provide a file in the specified file format available in SLB Circular (Ref. Circular No: NSE Clearing/SLBS/2008/001) containing details of the beneficiary accounts to which direct credit is to be given.

The borrowing Participants are required to return the securities borrowed on reverse leg settlement date of the respective series. The securities are returned to the lender of the securities by NSE Clearing on respective reverse leg settlement date of the series. In the case of borrower failing to return securities, NSE Clearing conducts an auction for obtaining securities. In the event of failure to procure securities in auction the transactions are financially closed-out on the basis of the close-out computation formula.

In the event of funds shortage by the borrower, the SLBS transactions are cancelled and the securities returned to the lenders along with lending fees.

In the event the lender fails to deliver securities, the transaction is closed out as per the below procedure.

Higher of:

  • 25% of closing price of the security on T+1 day (closing price for the security in the capital market segment of NSE), or
  • (Maximum trade price of the security in the capital market segment of NSE from T to T+1 day) - (T+1 day closing price of the security in capital market segment of NSE)

In the event the borrower fails to return the securities NSE Clearing conducts a buy-in auction in the Capital Market segment of NSE.

In the event of no offer in buy in auction/ failure to give delivery for offer in auction market on the settlement date, the transaction is closed out as per the below procedure.

Higher of:

  • The maximum traded price in the Capital Market segment of NSE from (reverse leg settlement date – 1day) to reverse leg settlement date, or
  • 25% above the closing price of the security in the capital market segment on the reverse leg settlement date.

In all cases of shortages, NSE Clearing may initiate various actions including withdrawal of access to the order matching platform, withhold of the securities/funds pay-out due to the Participant or any other action as may be intimated by NSE Clearing.

  • All transactions in case of corporate actions other than dividend and Stock spilt will be foreclosed on the ex-date.
  • In case of only AGM/EGM, depending upon the series of contracts , foreclosure shall be applicable.
  • In case of dividend, the dividend amount will be collected from the borrower by NSE Clearing and will be paid to the lender.
  • In case of stock split, the position of the borrower would be proportionately adjusted and the lender will receive the revised quantity on the reverse leg settlement date.

In case of corporate actions (other than Stock split & Dividend) all existing positions in SLBS are foreclosed on the Ex-Date. The lenders are required to repay proportionate amount of lending fees received from borrowers. The lending fees for the balance period shall be collected on pro rata basis from the lenders based on the lending fees received by them. The amount so collected shall be passed on to the borrowers in the ratio of their contribution to the pro rata lending fees receivable by them based on the lending fees paid by them. The lending fee will be brought by the lender on the foreclosure settlement date and will be passed on to the borrower.

 

However in case of foreclosure where the corporate action is announced upfront by NSE Clearing before the transaction has been executed there will be no adjustment of lending fee. Market participants shall accordingly quote lending fee for the shorter transaction cycle.

Download SLB-Settlement Calendar (.pdf)

Updated on: 17/02/2020 12:00
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