A Clearing Member (CM) of NSE Clearing 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:
Clearing - Computing obligations of all his TM's i.e. determining positions to settle.
Settlement - Performing actual settlement. Only funds settlement is allowed at present in Index as well as Stock futures and options contracts
Risk Management - Setting position limits based on upfront deposits / margins for each TM and monitoring positions on a continuous basis.
Types of Clearing Members
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 as well as of the Custodial Participants
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 at least Rs.300 lakhs. The net worth requirement for a CM who clears and settles only deals executed by him is Rs. 100 lakhs.
Deposit of Rs. 50 lakhs to NSE Clearing which forms part of the security deposit of the CM
Additional incremental deposits of Rs.10 lakhs to NSE Clearing for each additional TM in case the CM undertakes to clear and settle deals for other TMs
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Clearing Banks
NSE Clearing has empanelled 15 clearing banks namely Axis Bank Ltd., Bank of India Ltd., Canara Bank Ltd., Citibank N.A., The Hongkong & Shanghai Banking Corporation Ltd., ICICI Bank Ltd., HDFC Bank Ltd., IDBI Bank Ltd., IndusInd Bank Ltd., JPMorgan Chase Bank, Kotak Mahindra Bank Ltd., Standard Chartered Bank, Union Bank of India, State Bank of India and Yes Bank. Every Clearing Member is required to maintain and operate clearing accounts with any of the empanelled clearing banks at the designated clearing bank branches. The clearing accounts are to be used exclusively for clearing & settlement operations.
Clearing Account
Every Clearing Member is required to maintain and operate a primary clearing account with any one of the empanelled clearing banks at the designated clearing bank branches. The primary clearing account is to be used exclusively for clearing operations i.e., for settling funds and other obligations to the Clearing Corporation including payments of margins and penal charges. A Clearing member having funds obligation to pay shall ensure availability of sufficient clear balance in the clearing account on or before the stipulated funds pay-in day and the stipulated time.
Further, every clearing member can maintain and operate additional clearing accounts (Ref No: NSE/CMPT/12275) exclusively for the purpose of enhancement of collaterals. All the credits and debits other than collateral enhancement specified by the member shall be routed through the primary clearing account
Clearing Members are required to authorise the Clearing Bank to access their clearing accounts for debiting and crediting their accounts, reporting of balances and other information as may be required by NSE Clearing from time to time as per the specified format. The Clearing Bank will debit/ credit the clearing account of clearing members as per instructions received from the Clearing Corporation.
A Clearing member can deposit funds into these accounts in any form but can withdraw funds from these accounts only in self-name.
Clearing members shall not seek to close or de-activate the clearing account without the prior written consent of the Clearing Corporation
Change In Primary Clearing Bank
In case a clearing member wishes to shift the primary clearing account from one designated clearing bank to another designated clearing bank, the following procedure is required to be followed:
The clearing member while requesting the Clearing Corporation for a change in the primary clearing bank account shall either
Furnish the no objection certificate (NOC) received by the member from the existing primary clearing bank for shifting of account, or
In case no response was received by the clearing member from the existing primary clearing bank in respect of the NOC request even after a minimum waiting period of a fortnight, a declaration to the above effect along with an acknowledged copy of the NOC request made by the member to the existing primary clearing bank.
The Clearing Corporation would thereon issue a letter of introduction to the other designated clearing bank
On opening the account with the other designated clearing bank, the clearing member shall submit to the Clearing Corporation the account particulars issued by the bank and also the acknowledged copy of the letter issued by the clearing member to the clearing bank (as per specified format)
The Clearing Corporation shall thereon communicate the date from which the new primary clearing account will be operational. The clearing members are required to intimate the Clearing Corporation whether they wish to continue the existing primary clearing account as one of the additional clearing accounts or discontinue the existing primary clearing account after the change in primary clearing bank. In the event where the clearing members wish to discontinue the existing primary clearing account, the Clearing Corporation shall communicate the date after which the existing primary clearing account may be closed by the clearing member.
Clearing Mechanism
A Clearing Member's open position 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.
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.
Open Position Open position for the proprietary positions is calculated separately from client position.
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