The settlement process in Equity Derivatives segment shall be as under:
In order to make risk management framework more robust, the payment of MTM is mandatorily to be made by all the members on T+0 basis i.e. before start of trading on the next day.
Delivery based Settlement of Stock Derivatives
The following positions in respect of contracts identified by Exchange shall be physically settled:
- All open futures positions after close of trading on expiry day
- All open futures positions after close of trading on expiry day
The present facility of do-not-exercise provided for Close to Money (CTM) option contracts shall continue to be applicable in respect of stocks which are identified for physical settlement. In respect of option contracts where buyer has opted for do-not-exercise such contracts shall not be exercised.
Exercise timings will be from 4.15 pm to 5.00 pm (or as may be announced by ICCL from time to time) on the expiry day.
Pay-in & Pay-out of Funds and Securities
- Final settlement for futures: All outstanding positions identified for physical settlement on the contract expiry date will be settled by delivery of the underlying stock at the final settlement price of the respective contract. (Difference between previous day price and final settlement price on the expiry day will be cash settled along with daily Mark to Market (MTM) on T+1 Day as presently done)
- Final settlement for options: All outstanding positions identified as aforesaid for physical settlement on the contract expiry date will be settled by delivery of the underlying stock at the respective strike prices.
Early Pay-in of Funds
- On the contract expiry day for futures and options contracts ("E day"), the final settlement obligation will be computed and settled at a clearing member level after netting the obligations of all clients/trading members clearing through the respective clearing member.
- Settlement day: On E + 2 day, the clearing member will settle the obligations akin to the process which is currently being followed in the equity cash segment as per the settlement schedule issued by ICCL periodically.
- The Pay-in of funds: On the settlement (or E+2) day will be effected by 2:00 pm. The pay-in and pay-out of funds to be processed through the existing funds settlement account of Equity Derivatives Segment.
- The physical settlement of stock derivatives will be done in dematerialized form through the depositories viz NSDL and CDSL. The Clearing member delivering the stocks will be required to initiate the transfer of stocks to the respective depository's pool accounts within the cut-off time as stipulated by the depositories akin to the process followed in the equity cash segment.
- Existing equity cash segment's demat accounts can be used for settlement of securities in derivatives segment. A separate settlement type to be used for these settlements.
- In case of delivery shortages, an auction/close-out process similar to that for the equity segment at present will be followed.
- For settlement through custodians the Give-up/Take-up entries done by the members during the give-up/take-up session in the Equity derivatives segment will be considered for generating obligations.
Early Pay-in of Securities
- Members intending to avail delivery margin exemption on their buy positions in Equity derivatives segment can do so by effecting Early Pay-in of Funds.
- Clearing Members/Custodians can make entry for early pay-in of funds through a screen based request in ICCL Collateral Module under the existing menu of EPF for Equity derivatives segment. Upon clearing banks confirmation for the respective entry, early pay-in benefit will be provided.
- Clearing Members can additionally effect early pay-in of funds transactions at client level by uploading EPF file on extranet module along with screen based cash entry request in ICCL Collateral Module for early pay-in of funds benefit.
- Members intending to avail delivery margin exemption on their securities delivery positions in Equity derivatives segment can do so by effecting early pay-in of securities sold by them through either of the two depositories viz; CDSL or NSDL.
- For Early pay-in of securities through CDSL depository, clearing members will be required to transfer the securities in the specific CDSL early pay in account, as is being done in case of equity cash segment.
- For Early pay-in of securities through NSDL depository, clearing members will be required to give Irreversible Delivery Out instruction (IDO) instruction in their DP with appropriate details about the security, ISIN, Quantity and the Settlement number, as is being done in case of equity cash segment.
- Clearing Members can additionally effect early pay-in of securities at client level by uploading EPN file on extranet module
Members can give-up trades pertaining to their Custodial Participant clients who want to settle their trades through other Clearing Members. The Clearing Members of the custodial participants need to confirm such trades to take-up the positions for settlement. Such trades are to be confirmed by the Clearing Members in such manner, within such time and through such facility as may be provided to Clearing Members from time to time by BSE/ICCL. The trades which have been confirmed by Clearing Members will form part of the obligations of concerned Clearing Members and the Clearing Members will be responsible for all obligations arising out of such trades including the payment of margins, penalties, any other levies and settlement of obligations. In case of trades which have not been confirmed by the Clearing Members of the Custodial Participants, the same will be considered as trades pertaining to the Trading Members entering such trades and forming a part of the obligations of Clearing Members, who clear and settle for such Trading Members.
ICCL has provided the facility for setting take-up limits at Custodial Participant Code (CP Code) level and for on-line, real time auto take-up/confirmation of trades. The said facility is available in the Real Time Risk Management System (RTRMS) module.
The salient features of the said facilities in the RTRMS module are as follows:-
- For Auto Take-up process, CP - Clearing Members can select the option on RTRMS screen to activate their respective CP code/s for the facility of auto take-up/confirmation of trades till 5.00 pm on any working day. Such selected CP Codes will get activated for auto take-up/confirmation on the next trading day. For taking up of trades up to the assigned limit, the CP-Clearing Members would be required to set specific CP Code limit or select the option of 'unlimited' for taking-up position without any set limit. Accordingly, the system would accept trades for auto confirmation up to the set limit in respect of the activated CP Codes. On reaching the set limit of margin utilization, the pending trades under such CP code would get transferred to manual take-up mode and trading limits/margin deposits of the Trading Member/Clearing Member (mapped with the Trading Member) would get utilized as per the existing process.
- In Manual Take-up process, Members can give-up trades pertaining to their Custodial Participant clients who want to settle their trades through other Clearing Members. The Clearing Members of the custodial participants need to confirm such trades to take-up the positions for settlement.
- Once the confirmed trades appear under the CP-Clearing Member, all types of margins pertaining to such trades will be utilized from the collateral deposits of the concerned CP-Clearing Member on an on-line, real time basis. However, if such CP-Clearing Member confirming (taking-up) the trades do not have sufficient un-utilized collateral, then such trades will not get confirmed and margins of the Clearing Member (mapped with the Trading member) would be utilized.
The daily mark-to-market settlement and premium settlement of equity derivatives contracts would be cash settled on T+0 day basis i.e. before start of trading on the next day as per the timelines specified by ICCL.
- The Clearing Members should maintain clear balance of funds in their settlement account with their designated Clearing Bank towards their funds pay-in obligation at the scheduled pay-in time on the settlement day.
- The pay-out of funds shall be credited to the receiving Clearing member's settlement account with their designated Clearing Bank thereafter.
* Final settlement price for futures contract and option contract shall be the closing price of the relevant underlying index/security in the normal market of the Capital Market segment of the Stock Exchange on the last trading day of such futures contract. The closing price of the relevant underlying security is calculated on the basis of the last half an hour weighted average price of the relevant underlying security or such other price as may be decided by the relevant authority from time to time. All positions (brought forward, traded during the last day, closed out during the last day) of a clearing member in futures contracts, at the close of trading hours on the last trading day of the contract, are marked to market at final settlement price (for final settlement) and settled.