Settlement Mechanism
Settlement of futures contracts on currency
Daily Mark-to-Market Settlement
The positions in the futures contracts for each member are marked-to-market to the daily settlement price of the futures contracts at the end of each trade day.
The profits/ losses are computed as the difference between the trade price or the previous day’s settlement price, as the case may be, and the current day’s settlement price. The CMs who have suffered a loss are required to pay the mark-to-market loss amount to NSE CLEARING which is passed on to the members who have made a profit. This is known as daily mark-to-market settlement.
Theoretical daily settlement price for unexpired futures contracts, which are not traded during the last half an hour on a day, is currently the price computed as per the formula.
After daily settlement, all the open positions are reset to the daily settlement price.
CMs are responsible to collect and settle the daily mark to market profits/losses incurred by the TMs and their clients clearing and settling through them. The pay-in and pay-out of the mark-to-market settlement is on T+1 day (T = Trade day). The mark to market losses or profits are directly debited or credited to the CMs clearing bank account.
Final Settlement
On the expiry of the futures contracts, NSE CLEARING marks all positions of a CM to the final settlement price and the resulting profit / loss are settled in cash.
The final settlement profit / loss is computed as the difference between trade price or the previous day’s settlement price, as the case may be, and the RBI reference rate of such futures contract on the last trading day.
Final settlement loss/ profit amount is debited/ credited to the relevant CMs clearing bank account on T+2 day (T= last trading day).
Open positions in futures contracts cease to exist after their last trading day.
Funds Shortage
Non-fulfilment of settlement obligation towards settlement of Currency Derivatives contracts by the scheduled date and time shall be treated as a violation.
In case of a settlement shortage of Rs.5 lakhs or more the Clearing Corporation may advise the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of custodial participants clearing through such clearing members.
In case of settlement shortage of less than Rs.5lakhs the amount of shortage shall be blocked from the effective deposits of the clearing member to the extent of funds shortage. This may lead to the withdrawal of the trading facility of the clearing member and the associated trading member.
Further, if the clearing member is short for an amount of Rs.2 lakhs or more in six or more occasions in the preceding three months, the Clearing Corporation may advise the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of custodial participants clearing through such clearing members.
In case of any settlement shortages a penal charges of 0.07% per day of shortage shall be levied.
The funds defaulting member will be allowed such time as may be permitted by the relevant authority depending upon the facts of the case to bring in the amount in default. If the member does not bring in the amount by the time permitted by the relevant authority, and continues to default thereafter, the relevant authority would be constrained to initiate suitable action including withdrawal of his trading facility, appropriation of his capital / deposits with the Exchange / Clearing Corporation and/or declare him a defaulter.