Settlement of Admitted Deals

Admitted deals executed on a trading day, shall be cleared on a netted basis, by MCCIL. Subject to the above, settlement obligations of all clearing members shall arise. The clearing members shall be responsible for all obligations arising out of such trades including the payment of margins, penalties, charges, any other levies and settlement of obligations of the trades entered by them as trading members and also of those trading members, clearing member participants and custodial participants, if any, for whom they have undertaken to settle as a clearing member.

Where the clearing member is not a trading member of the Exchange then the trades of those trading members, clearing member participants and custodial participants for whom the clearing member has undertaken to settle shall be considered for determining the obligations as a clearing member.

Clearing Member Participant (CP) & CP trades

Clearing Member Participants are those constituents who are eligible for trading through trading members and clearing and settling deals through clearing members. Such CPs shall enter into an agreement (format specified by clearing corporation) with the respective Clearing Member and register with the Clearing Corporation through their clearing member. Clearing Corporation shall provide CP codes for such clients, which will be used while entering deals to be settled through the clearing member. All the format of letters to be submitted by the Clearing Member Participant (CP), Clearing Member and the Custodian (in case of FII, Sub Accounts and MF Clients) for allotment of CP Code is available on www.MSEI.in

Clearing member of the CP shall confirm trades entered into on behalf of the CPs. Such trades shall be confirmed by the clearing All such trades which have been confirmed by clearing members shall form part of the obligations of concerned clearing members and such clearing members shall be responsible for all obligations arising out of such trades including the payment of margins, penalties, any other levies and settlement of obligations. Trades which have not been confirmed by clearing member of the CP shall be considered as trades pertaining to the trading member entering such trades and shall form a part of the obligations of clearing members, who clear and settle for such trading members.

Daily MTM settlement for Futures Contracts

Daily mark to market settlement and final settlement in respect of admitted deals in futures contracts shall be cash settled by debit/ credit of the clearing accounts of clearing members with the respective clearing bank. All positions (brought forward, created during the day, closed out during the day) of a clearing member in futures contracts, at the close of trading hours on a day, shall be marked to market at the daily settlement price (for daily mark to market settlement) and settled.

Final MTM settlement for Futures Contracts

All positions (brought forward, created during the day, closed out during the day) of a clearing member in futures contracts, at the close of trading hours on the last trading day of the contract, shall be marked to market at final settlement price (for final settlement) and settled. Open positions in a futures contract shall cease to exist after its expiration day.

Premium settlement for option contracts

Premium settlement in respect of admitted deals in option contracts shall be netted with futures MTM settlement and shall be cash settled by debit/ credit of the clearing accounts of clearing members with the respective clearing bank. The premium payable or receivable value of clearing members shall be computed after netting the premium payable or receivable positions at trading member level, for each option contract, at the end of each trading day.

Exercise settlement for option contracts

Exercise style of option contracts on individual securities shall be European style wherein all in-the-money contracts shall get automatically exercised on the expiry day. Exercise settlement shall be effected for all in-the-money option contracts on the last trading day of an option contract. Long positions at in-the money contracts shall be assigned to short positions in option contracts with the same series on a random basis. Option contracts, which have been exercised, shall be assigned and allocated to clearing members, at the client level on a random basis.

Final exercise settlement

Final exercise settlement shall be effected for all in-the-money option contracts on the last trading day of an option contract. Long positions at in-the money strike prices shall be assigned to short positions in option contracts with the same series at the client level on a random basis. Option contracts shall be cash settled in F & O segment, by debit/ credit of relevant clearing accounts of relevant clearing members with the respective clearing bank towards the exercise settlement value for each unit of the option contract. Open positions, in option on individual securities contracts, shall cease to exist after exercise or on expiration day as the case may be.

The pay-in and pay-out of daily mark to market settlements and final settlement obligations shall be effected in accordance with the settlement schedule issued by MCCIL periodically or from time to time. The Clearing Members shall have have clear balance of funds in their settlement account towards their pay-in obligation by the declared pay-in time on the settlement day. The pay-out of funds shall be credited to the receiving members settlement account on or after the scheduled payout time.

Settlement Price

Closing price of future contracts shall be the Daily settlement price for the same. The closing price for a futures contract shall be calculated on the basis of the last half an hour weighted average price of such contract or such other price as may be decided by the relevant authority from time to time. Theoretical Daily Settlement Price for unexpired futures contracts, which are not traded during the last half an hour on a day, shall be the price computed as per the formula:

Exercise settlement for option contracts

Exercise style of option contracts on individual securities shall be European style wherein all in-the-money contracts shall get automatically exercised on the expiry day. Exercise settlement shall be effected for all in-the-money option contracts on the last trading day of an option contract. Long positions at in-the money contracts shall be assigned to short positions in option contracts with the same series on a random basis. Option contracts, which have been exercised, shall be assigned and allocated to clearing members, at the client level on a random basis.

F = S * e^rt
where:
F = theoretical futures price
S = value of the underlying
r = rate of interest (MIBOR)
t = time to expiration

Rate of interest may be the relevant MIBOR rate or such other rate as may be specified by MCCIL.

Final exercise settlement

Final exercise settlement shall be effected for all in-the-money option contracts on the last trading day of an option contract. Long positions at in-the money strike prices shall be assigned to short positions in option contracts with the same series at the client level on a random basis. Option contracts shall be cash settled in F & O segment, by debit/ credit of relevant clearing accounts of relevant clearing members with the respective clearing bank towards the exercise settlement value for each unit of the option contract. Open positions, in option on individual securities contracts, shall cease to exist after exercise or on expiration day as the case may be.

Final Settlement Price for a futures contract shall be the closing price of the relevant underlying security in the Normal Market of the Capital Market segment of MSE on the last trading day of such futures contract or such other price as may be decided by the relevant authority from time to time. Final Exercise Settlement Price for an option contract shall be the closing price of the relevant underlying security in the Normal Market of the Capital Market segment of MSE on the last trading day of the options contract or such other price as may be decided by the relevant authority from time to time. The closing price of the relevant underlying security shall be 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.

Settlement of Pay-in Obligations

MCCIL shall provide options to clearing members to meet/settle pay-in obligations on a T+0 or T+1 basis. MCCIL shall settle pay-in obligations on T+0 basis unless specified by clearing member as mentioned above. Clearing members, who desire to settle pay-in obligations on a T+1 basis, shall specify their intent as per the format specified in Annexure 2.1. Clearing members who opt for pay-in on a T+1 basis shall be levied the scaled up margins.

Stringent actions will be taken against members who opt for T+0 pay-in, but fail to make pay-in in part or in full, before start of market. The pay-out shall continue to be done on T+1 day basis, or as declared by the Clearing Corporation from time to time.

Clearing Members shall maintain and operate a separate and distinct Settlement account with any one of the designated Clearing Banks. The settlement bank A/c maintained by the existing Clearing members for pay-in / pay-outs by MSE will be considered for the pay-in / pay-out by MCCIL. Clearing members shall irrevocably authorize the Clearing Bank to access their Settlement account for debiting and crediting their settlement account as per the instructions of MCCIL, reporting of balances and other information, as may be required by MCCIL from time to time.

Clearing members can deposit funds into this designated settlement account in any form and can withdraw funds from this account only in self-name. Clearing members having funds obligation to pay shall have clear balance of requisite funds in this Settlement account on or before the stipulated funds pay-in day and the stipulated time. Clearing members shall not seek for closure or de-activation or revocation of the authorization of this Settlement account without prior written consent of MCCIL and the Clearing Banks shall not close the Settlement account or permit deactivation of the same without prior written consent of MCCIL. All bank confirmations received from clearing banks on behalf of the members towards margins, funds pay-in, EPI of funds, collateral enhancements etc. shall be given effect only after receiving a written/electronic confirmation from their respective clearing banks.

Change in the Clearing Bank

In case a Clearing Member desires to shift his settlement accounts from one clearing bank to other clearing bank, he shall inform MCCIL in writing in the specified format. On receipt of the same, MCCIL will process the application and convey its consent to the Clearing Member provided no dues are pending.

On receipt of the consent from MCCIL, the Clearing Member shall submit the following documents to MCCIL:

• No Objection Certificate (NOC) from the existing Clearing Bank.
• Letter from the Clearing Member on his letter head specifying the shift of accounts to another clearing bank, the settlement account number, along with effective date.
• Letter from the new clearing bank confirming the settlement account number of the Clearing Member.
• A copy of the authorization as per the specified format, duly acknowledged by the new clearing bank.

On receipt of the above said documents, MCCIL will update its records and any subsequent funds pay-in / pay-out will take place through the new settlement account of the member.