Securities Settlement

T+1 Settlement

On the settlement day NSE Clearing accepts pay-in of securities made by clearing members/custodians through depositories.  The clearing members / custodians are required to make available the required securities in the settlement pool accounts with the depository participants on the pay-in day by 10.30 a.m. Subsequent to receipt of pay-in instructions from the depositories, NSE Clearing determines the shortages after which pay-out files are generated and released to the depositories. Here, the payout is released by NCL directly to the demat accounts of clients by 3.30 p.m.

In case of short deliveries on the T+1 day in the normal segment (including internal shortages of members), NSE Clearing conducts a buy –in auction on the T+1 day itself and the settlement for the same is completed on the T+2 day, whereas in case of Z  settlement Type  there is a direct close out. 

Direct payout to client demat accounts and auction for internal shortages

SEBI vide circular reference number SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/75 dated June 5, 2024 , has mandated that the payout of securities be credited directly to the client account. This is to protect clients’ securities and to ensure that the stock brokers segregate securities  of the  client  or clients so  that  they are  not vulnerable to misuse. 

• The direct payout is not applicable for clients having arrangement with Custodians.

A. Set up of primary demat accounts

Exchanges have set forth the requirements to trading members to update the primary demat accounts for all existing UCCs in the UCC database. 

Such demat accounts, once verified by depositories shall be used by the CCs to release instructions to depositories to credit the securities payout to the clients’ accounts.

B. Hop/skip entries through CM/TM pool accounts

• Based on the payout instructions received from the CCs, the depositories  transfer the securities pay-out to the primary demat account of the client with hop/skip entries in the CM pool and TM pool account. 

• Here securities will technically move from the CCs to the Clearing member pool account, then to the Trading member pool account and finally to the client’s demat account.

• All Clearing members and trading members are required to open Clearing member pool and Trading Member pool account respectively with depositories for this purpose.

C. Release of payout with pledge

• CC provides a facility to clearing members to release pay-out to clients with pledge in favour of Client Unpaid Securities Pledgee account (CUSPA) in case the client or TM is unpaid.

• CCs also provides facility to members to release pay-out with pledge in favour of Client Securities Under Margin Funding Account (CSMFA) where TMs are offering Margin trading facility (MTF) to their clients. 

• Members are required to upload such requests to the CC through a file based facility.

• Based on such requests which are successfully processed, CC releases pay-out to clients under Unpaid/ MTF pledge flag. Depositories are required to release the pay-out to clients and mark a pledge in favor of CUSPA/ CSMFA account of clearing/trading member, as the case may be. 

• Clearing members and trading members are required to open CM CUSPA and TM CUSPA accounts in the depositories where their client accounts are present, for the above.

D. Credit of payout to clearing member’s pool account 

In the following cases the securities payout is credited to the clearing member’s pool account:

• Payout of proprietary account for devolvement on account of custodian rejections

• Absence of verified primary demat account

• Pay-in received from a clearing member which is in excess of the gross of net sell obligation of their selling clients 

• Rejection of direct payout instructions by depositories

• Payout to -DR clients identified by exchanges

E. Mandatory auction for internal shortages

• It shall be mandatory for CM/TM to handle internal shortages through the process of auction as specified by CCs. 

• All the internal shortages are identified by NCL and sent for auction.

• For clearing members of F&O that are SEBI registered Custodian, NCL shall facilitate auction for internal shortage with existing file-based mechanism.

• The guidelines for auction of internal shortages are summarized as below:

• NCL shall identify internal shortages by comparing gross sell obligation of clearing member vis-a-vis pay-in received for clearing member for both depositories. 

• The gross sell obligation of clearing member shall be computed as gross of net sell obligation across all clients of a clearing member for a security. 

• Member shall ensure to provide entire gross sell obligation as security pay-in to CC. 

• Where member effects payout to receiving clients on its own and does not provide the same to CC in pay-in, CC shall consider such quantities as short received for internal shortage computation. 

• It shall be mandatory for members to pay valuation amount (settlement price of the security and additional mark up as specified by CC from time to time) for internal shortages identified by CC as per timelines specified by CC. 

• Where member has not paid valuation amount CC shall not conduct auction for the internal shortage. 

• While CC will identify and provide details of internal shortages and the valuation amount to be paid by member, members shall have internal processes to identify the internal shortages in advance and provide the valuation amount by specified timelines. 

• Where auction is not conducted on account of reason such as valuation debit not paid by member or on account of excess pay in by any member/clients or in case of corporate action in security or where the auction by CC was unsuccessful or file not uploaded by custodian member or any other reason specified from time to time, the brokers/members shall pass close out entry in the books at the auction rate and in absence of auction rate at the close out rate. 

• In case auction is not conducted due to receipt of excess payin, the credit shall be given to client who has done excess pay-in. 

• Members shall voluntarily bring to the notice of CC, where an auction profit is being identified by the members at the client level, including internal shortages. 

• The details of reports to be referred for auction of internal shortages are given in circular  CMPT66689  dated February 14, 2025.

F.  Revised deadline for payout of securities

• In view of release of securities directly to client demat accounts, the final securities pay-out deadline has been extended to 3:30 pm from existing 1:30 pm vide SEBI circular SEBI/HO/MRD/MRD-PoD-2/P/CIR/2024/137dated October 10, 2024. 

• The final reports will be downloaded to members after receipt and processing of final confirmations from both depositories.

T+0 Settlement

In a T+0 rolling settlement, trades are executed on trading day till 1:30 pm. The obligations are determined on the T day by 2:30 pm and settlement is completed thereafter. 

For non-custodial transactions pay-in for T+0 sell obligations shall be allowed only by way of early pay-in using block mechanism by 1:45 pm. For confirmed custodial transactions NCL shall upload auto delivery out instructions for the net deliverable obligations in custodian pool account. For non-confirmed/ rejected custodial transactions, NCL shall provide Auto-Do instructions for incremental security delivery obligation in member pool account. The cut-off for executing the securities pay-in at depositories end is 3:30 pm.  Payout instructions are generated subsequent to pay-in and released to depositories on the same day i.e. T day.

Any shortage in securities early pay-in is directly closed out.

No trading is done in T+0 securities in case of settlement/bank holiday.