By implementing strict delivery versus payment within a rolling T+3 settlement cycle, the CDS has significantly improved the efficiency of the settlement mechanism for the stock market. Securities are settled in the CDS system on a gross basis (trade-for-trade processing) while funds are settled on a net basis through the central bank.
Deadlines applicable for trade confirmation and trade ammendments
1. Stockbroking companies may submit requests for trade amendments which do not affect accounts of clients of custodian banks, up to T+3, 9.30 a.m. A surcharge is however be imposed if such requests are submitted after T+2, noon.
2. For trade amendments which affect Securities accounts of clients of custodian banks, stockbroking companies may submit their requests up to T+1, 4.30 p.m. However, after T, the prior agreement of the custodian bank is required before the trade is amended.
3. Custodian banks have up to T+2, noon to confirm purchases that have been allocated to the clients by stockbroking companies on T and up to T+2, 4.30 p.m. to confirm purchases that have been allocated to their clients on T+1. Any request for trade acceptance of purchase transactions after those deadlines is subject to surcharge.
4. CDS does not accept any request for acceptance of purchase transactions after T+3, 9.30 a.m.
5. A purchase that has not been accepted by T+3, 9.30 a.m. must be settled by the stockbroking company which effected the trade
6. Custodian banks have up to T+2, noon to confirm sales that have been allocated to their clients on T and up to T+2, 4.30 p.m. to confirm sales that have been allocated to their clients on T+1. Any request submitted after the deadline is subject to a surcharge
7. A sale transaction not confirmed by T+3, 9.30 a.m. is treated as a failed trade. CDS will initiate buy-in procedures. However, if the custodian bank subsequently accepts the trade, CDS will abort buy-in procedures provided that such confirmation reaches CDS before T+5, 9.30 a.m. Such confirmations is subject to a surcharge.
8. Sales accepted after T+3, 9.30 a.m. will be settled through the CDS Settlement Services on the business day following the day on which the trade is accepted and the sale will be deemed to have been effected on T itself.
Surcharges applicable for
late trade confirmation and trade corrections
1. In respect of trade amendment or confirmation
after T+2, noon
2. In respect of custodian trades amended on T+1 and confirmed
by the custodian bank after T+2, 4.30 p.m.
0.02 % of the value of the transaction with a
minimum of Rs 1,000/- and a maximum of Rs 5,000/-
3. In respect of sale transactions allocated
to clients of Custodian Banks that are confirmed by the latter
after T+3, 9.30 a.m.
0.04% of the value of the transaction with a
minimum of Rs 2,000/- and a maximum of Rs 10,000/-
Clearing and Settlement
By implementing strict delivery versus payment within a rolling T+3 settlement cycle, the CDS has significantly improved the efficiency of the settlement mechanism for the stock market. Securities are settled in the CDS system on a gross basis (trade-for-trade processing) while funds are settled on a net basis through the central bank.
Trades executed on the Automated Trading System (SEMATS) are automatically fed into the CDS system and the relevant securities accounts are updated on a real-time basis (purchase-in-suspense, sale-in-suspense). Trade confirmation between stock broking companies occurs immediately after trading on T+0. Contract notes, transaction reports, and settlement obligations are printed by CDS and made available to Participants on trade date itself (T+0).
On trade day, the seller’s (either the participant’s account or the client’s account) Securities Account shows a Sale-in-Suspense and the traded securities are not available for further trade. The buyer’s (either the participant’s account or the client’s account) Securities Account shows a Purchase-in-Suspense. With the implementation of turnaround trading as from 11th April 2008, securities purchased may be subsequently sold before the settlement date.
Custodian banks have up to T+2 noon to confirm trades that have been allocated to their clients by stock broking companies. A trade that is not confirmed by the custodian bank has to be settled by the stock broking company that effected the trade on the exchange. Stock broking companies may re-allocate trades up to T+2 noon. Trades that are confirmed or re-allocated between T+2 noon and T+3 9:00 Hrs are subject to a fine. No confirmation or re-allocation is allowed after T+3 9:00 Hrs.
On settlement date, funds transfer between the seller’s and buyer’s participants takes place at a cut-off time on a net basis through the participants’ settlement banks and the clearing bank (Central Bank). When funds settlement is completed by final and irrevocable transfer in the books of the central bank, the latter informs the CDS which then immediately transfers the securities by debiting the seller’s Securities Account and crediting the buyer’s Securities Account. This ensures strict delivery versus payment.
The system maintains a net amount owed to or by the participant in settlement of all trades processed by the system. A single net payment is made to or by the participant in respect of any trading day. For each trading session the net settlement liability of each participant is computed. The system also keeps track of the net cumulative liability of each participant.
