NSCCL carries out the clearing and settlement of the trades executed in the equities and derivatives segments of the NSE. It operates a well-defined settlement cycle and there are no deviations or deferments from this cycle. It aggregates trades over a trading period, nets the positions to determine the liabilities of members and ensures movement of funds and securities to meet respective liabilities. NSCCL acts as legal counter-party to all deals on NSE's F&O segment and guarantees settlement.

NSCCL has empanelled 8 clearing banks to provide banking services to trading members and has established connectivity with both the depositories for electronic settlement of securities.

It also undertakes settlement of transactions on other stock exchanges like, the Over the Counter Exchange of India.

SEBI vide its circular no.SMDRP/Policy/Cir-05/2001 dated February 1, 2001 had directed stock exchanges to introduce a settlement system for direct delivery of securities to the investors accounts with effect from April 2, 2001.

Accordingly, NSCCL has introduced the facility of direct payout to clients' account on both the depositories. It ascertains from each clearing member, the beneficiary account details of their respective clients who are due to receive pay out of securities. NSCCL has provided its members with a front-end for creating the file through which the information is provided to NSCCL. Based on the information received from members, the Clearing Corporation sends payout instructions to the depositories, so that the client receives the pay out of securities directly to their accounts on the pay-out day. The client receives payout to the extent of instructions received from the respective clearing members. To the extent of instruction not received, the securities are credited to the CM pool account of the member.

NSCCL assumes the counter-party risk of each member and guarantees settlement through a fine-tuned risk management system and an innovative method of on-line position monitoring.

A large Settlement Guarantee Fund, which stood at Rs. 2,177.61 crores at the end of February 2004 (for Capital Market Segment) provides the cushion for any residual risk. It operates like a self-insurance mechanism where members contribute to the Fund. In the event of failure of a trading member to meet settlement obligations or committing default, the Fund is utilised to the extent required for successful completion of the settlement. This has eliminated counter-party risk of trading on the Exchange. As a consequence, credit risk no longer poses any threat in the market place. The market has full confidence that settlement shall take place in time and shall be completed irrespective of default by isolated trading members.

A separate Settlement Guarantee Fund is maintained for the Futures & Options segment. The corpus of the Fund at the end of February 2004 stood at Rs. 4,890.50 crores.

The National Securities Clearing Corporation Ltd. (NSCCL), a wholly owned subsidiary of NSE, was incorporated in August 1995. It was the first clearing corporation to be established in the country and also the first clearing corporation in the country to introduce settlement guarantee.

It was set up with the following objectives

• to bring and sustain confidence in clearing and settlement of securities;

• to promote and maintain, short and consistent settlement cycles;

• to provide counter-party risk guarantee, and

• to operate a tight risk containment system.

NSCCL commenced clearing operations in April 1996. It has since completed more than 1000 settlements (equities segment) without delays or disruptions.

A Clearing Member (CM) of NSCCL has the responsibility of clearing and settlement of all deals executed by Trading Members (TM) on NSE, who clear and settle such deals through them. Primarily, the CM performs the following functions:

1. Clearing – Computing obligations of all his TM's i.e. determining positions to settle.

2. Settlement - Performing actual settlement. Only funds settlement is allowed in Nifty Index Futures and Options contracts.

3. Risk Management – Setting position limits based on upfront deposits / margins for each TM and monitoring positions on a continuous basis.

• Trading Member Clearing Member (TM-CM)
  A Clearing Member who is also a TM. Such CMs may clear and settle their own proprietary trades, their clients’ trades as well as trades of other TM’s

• Professional Clearing Member (PCM)
  A CM who is not a TM. Typically banks or custodians could become a PCM and clear and settle for TM’s.

• Self Clearing Member (SCM)
  A Clearing Member who is also a TM. Such CMs may clear and settle only their own proprietary trades and their clients’ trades but cannot clear and settle trades of other TM’s.

Clearing Member Eligibility Norms

• Net worth of atleast Rs.300 lakhs. The net worth requirement for a CM who clears and settles only deals executed by him is Rs. 100 lakhs.M

• Deposit of Rs. 50 lakhs to NSCCL which forms the Base Minimum Capital (BMC) of the CM.

• Additional incremental deposits of Rs.10 lakhs to NSCCL for each additional TM in case the CM undertakes to clear and settle deals for other TMs.

NSCCL has empanelled 8 clearing banks namely Canara Bank, HDFC Bank, Global Trust Bank, IndusInd Bank, ICICI Bank, UTI Bank, Centurion Bank, Bank of India, IDBI Bank and Standard Chartered Bank.

Every Clearing Member is required to maintain and operate a clearing account with any one of the empanelled clearing banks at the designated clearing bank branches. The clearing account is to be used exclusively for clearing & settlement operations.

A Clearing Member's open position calculation is arrived by aggregating the open position of all the Trading Members (TM) and all custodial participants clearing through him. A TM's open position in turn includes his proprietary open position and clients’ open positions.

1. Proprietary / Clients’ Open Position
   While entering orders on the trading system, TMs are required to identify them as proprietary (if they are own trades) or client (if entered on behalf of clients) through 'Pro / Cli' indicator provided in the order entry screen. The proprietary positions are calculated on net basis (buy - sell) and client positions are calculated on gross of net positions of each client i.e., a buy trade is off-set by a sell trade and a sell trade is off-set by a buy trade.

2. Open Position
   Open position for the proprietary position are calculated separately from client position.

For example,

For a CM - XYZ, with TMs clearing through him - ABC and PQR -

XYZ’s open position for Nifty January contract is :

Settlement Schedule