Security Shortages - Close-out procedures at NSE

If the securities are not bought in the auction session (if there are no sellers even in the auction) they are deemed closed out at the highest price between the first day of the trading period till the day of squaring off or 20% greater than the official close price on the close out day, whichever is higher. This amount is credited to the receiving member’s account on the auction pay-out day and charged to the default broker who passes these charges on to the concerned client.

In case of auction non-delivery i.e. the auction seller fails to deliver the securities on the day of pay-in day the deal will be squared up at the highest price on the NSE from the first day of the relevant trading period to the close out day or 20% greater than the official close price on the close out day, whichever is higher. The auction seller will have to pay this amount.

In case of auction bad-delivery i.e. the auction securities delivery reported as bad delivery the deal will be squared up at the highest price on the NSE from the first day of the relevant trading period to the close out day or 10% greater than the official close price on the close out day, whichever is higher. The auction seller will have to pay this amount.

August 17, 2008 | Filed Under Stocks | Leave a Comment

Security Shortages - Close-out procedures at BSE

In BSE the close out procedures varies from group to group. There won’t be any auction for Z group, TS group and T group shares and are settled at a price whichever is higher in the following.

The highest rate of the scrip from the day of trading to the day prior to the day of auction of the respective settlements
10% above the closing rate as on the day prior to the day of auction/ close out of the respective settlement.

The settlement in ‘A’, ‘B’, ‘S’ and ‘F’ groups are done at a price whichever is higher in the following if the securities are not bought in auction or auction seller fails to deliver the securities on the day of auction pay-in. In first case the seller broker is charged and in second case the auction seller’s account is debited.

The highest rate of the scrip from the trading day to the day prior to the day on which the auction is conducted for the respective settlement.20% above the closing rate as on the day prior to the day of auction/close out of the respective settlement.

August 17, 2008 | Filed Under Stocks | Leave a Comment

Handling Funds Shortages in Trading and Settlement

The trading and/or clearing facility of the members will be withdrawn if they fail to fulfill their funds obligations. This applies to valuation debit as well i.e. the amount to be debited from the members’ account as an initial amount towards short fall of securities on the pay-in day. Further, securities pay-out, due to such clearing member shall also be withheld.

The above provisions shall apply if net cumulative fund shortage for a member is:
1. Equal to or greater than Rs. Five (5) lakhs at the end of pay-in.
2. Equal to or greater than Rs. Two (2) lakhs for six (6) or more occasions in the last three (3) months on any given day.

In case, the member is disabled on account of (2) above, on making good the shortage amount, the member shall be permitted to trade subject to its providing a deposit equivalent to its cumulative funds shortage as the ‘funds shortage collateral’. Such deposit shall be kept with the Clearing Corporation for a period of ten settlements and shall be released only if no further funds shortages are reported for the member in next ten consecutive settlements. Members may further note that there shall not be any margin benefit or any interest payment on the amount so deposited as ‘funds shortage collateral’. Read more

August 17, 2008 | Filed Under Stocks | Leave a Comment

Clearing Agencies at NSE, BSE

NSE and BSE have different clearing agencies to settle trades executed on their exchanges.

The Clearing House: The clearing and settlement activities of trades on BSE are taken care by BOI (Bank Of India) Share Holding. BOI Share Holding is a subsidiary company of BSE and Bank Of India. It’s also known as Clearing Hose.

The Clearing Corporation: The National Securities Clearing Corporation Limited (NSCCL) takes care about clearing and settlement activities of NSE. NSCCL is a fully owned subsidiary of National Stock Exchange (NSE), India. Simply it’s called as Clearing Corporation. Read more

August 3, 2008 | Filed Under Stocks | Leave a Comment

Brokerage house/Trading member & Clearing member

Brokerage firm

It’s a financial intermediary which interfaces with the investors to buy or sell securities on behalf of them and charges some percentage of the settlement amount for doing so. A brokerage firm can also buy/sell securities for their own firm.

As per the definition trading member is a firm which is a member of BSE or NSE and is authorized to place orders in the capital market system. So the word brokerage house gives the same meaning of trading member.

Clearing member is a firm which is a member of an exchange’s clearing corporation and involves in clearing of trades. Most of the brokerage houses are clearing members. If a brokerage firm doesn’t have the authority to clear the trades they have to register their trades with a clearing member to get them settled.

All retail investors should open an account with a brokerage firm to buy/sell securities. It accepts orders from the investors who registered with the firm, validates the orders (with the help of their own software) and routes them to the exchange.
Once the orders have been traded, it sends back the order confirmation to the investors. A brokerage firm is also responsible for delivering funds/securities to the investors once the trade has been settled. Read more

August 3, 2008 | Filed Under Stocks | 5 Comments