NSCCL- 7 Most Important Points about NSE Clearing

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Basics First – NSCCL Full Form and History

NSCCL was established in August 1995 as a wholly-owned subsidiary of the National Stock Exchange (NSE). NSCCL full form is National Securities Clearing Corporation Limited and it was the first securities clearing house in the country to be established. It was also the first clearing corporation in the country to implement a settlement guarantee. 

NSCCL Account - 7 Most Important Points

NSCCL has now been renamed to NSE Clearing Limited and it has been designated as a Qualified Central Counterparty (QCCP) and a systemically important market infrastructure institution by the Security Exchange Board of India (SEBI). 

NSE Clearing Ltd has been assigned the highest corporate credit rating of ‘AAA’ by CRISIL, indicating highest degree of strength in terms of debt repayment.  

What are the objectives of NSCCL? 

NSE Clearing Ltd (NSCCL)

NSCCL aims to provide safe and efficient value-added services while also setting global benchmarks through strong risk management systems and processes. Primary objectives of NSE Clearing are outlined below.

  • To facilitate clearing & settlement of securities 
  • Keeping strict short-cycle settlements 
  • Offering counter-party risk guarantee for concerned parties
  • Facilitating the risk-addressing system 

Who are eligible for the member admission process for NSCCL? 

Membership in NSCCL is open to the following entities, provided they meet the SEBI and NSE eligibility criteria. 

  1. Individuals 
  1. Partnership firms 
  1. Limited liability partnership 
  1. Corporate entities 

What is the settlement process through NSE Clearing? 

1- NSCCL receives all trades executed or locked in the trading day at the beginning of the settlement cycle. 

2- After receiving the details of all trades, it calculates each member’s cumulative obligation for trade settlement. 

3- This information is then electronically transmitted to the Clearing Members (CMs). Every trade completed during a specific trading period is settled together for all members. 

4- The clearing house then employs a multilateral netting procedure to calculate each Clearing Member’s net settlement obligation, regardless of whether the position is a delivery or receiver.

5- Following that, the settlement procedure entails allocating the delivery of securities to arrive at the exact delivery and receipt obligations of funds and securities for each NSCCL member. 

6- When the pay-out of funds and securities is declared and released, the settlement procedure is complete. 

7- The delivering members are required to bring in the securities on the pay-in day and deliver them to the respective receiving members on the pay-out day. 

What are NSCCL’s products? 

The clearing house is not only in charge of settling stocks listed on the NSE, but it also serves as a centralized portal for settlements of other products. The available products that are catered by NSCCL are stated below. 

  • Equities 
  • Equity & Commodity Derivatives 
  • Commodity Derivatives 
  • Retail Debt  
  • NSE Bond Futures on Government Bonds or T-Bills 
  • Corporate Bonds 
  • MFSS (Mutual Fund Service System) 
  • Security Lending and Borrowing Scheme (SLBS) 

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Who are the partners of NSCCL?

There are different participants & partners that are responsible for settlement of trade transactions. The key partners of National Securities Clearing Corporation Ltd are: 

1- Clearing member 

A Clearing Member is a Clearing Corporation member who clears and settles transactions through the Clearing Corporation. Through their NSCCL account, clearing members clear and settle deals for a segment in the manner and mode prescribed for them, subject to the terms and conditions and procedures.

Further, a Clearing Member may clear and settle deals either on their own account or on behalf of their clients subject to the terms and conditions prescribed by the clearing corporation.

2- Clearing bank 

Clearing banks act as a single point of contact to all clearing members for services like branches across cities, advanced electronic fund transfer portals, offering working capital facilities, deal settlements, and banking facilities like issuing bank guarantees/credit facilities etc.

There are a total of 13 banks that facilitates the clearing services

  • Axis Bank Ltd. 
  • Bank of India Ltd. 
  • Canara Bank Ltd. 
  • Citibank
  • The Hongkong & Shanghai Banking Corporation Ltd. 
  • ICICI Bank Ltd. 
  • HDFC Bank Ltd. 
  • IDBI Bank Ltd. 
  • IndusInd Bank Ltd. 
  • Kotak Mahindra Bank Ltd. 
  • Standard Chartered Bank 
  • Union Bank of India 
  • State Bank of India 

3- Custodians 

Custodians settle trade on behalf of their clients by confirming their settlement and taking the obligation assigned by the clearing house. If the settlement is not confirmed, the trading member bears the settlement obligation levied by the clearing house.

4- Depository 

They as a partner are responsible for promoting the dematerialization of the listed shares on the stock exchanges. For electronic settlement of securities, NSE Clearing is associated to both depositories in India, NSDL (National Securities Depository Limited) which is promoted by NSE and CDSL (Central Securities Depository Limited) promoted by BSE Ltd.

SEBI has gradually made dematerialized settlement mandatory, resulting in an increase in the proportion of shares delivered in dematerialized form resulting in 99% of all securities settlements in dematerialized form in India. 

5- Professional Clearing Members 

Professional clearing members are admitted as a special category of members by the Clearing Corporation. Clearing members who are not trading members are referred to as Professional Clearing Members (PCM). They are typically banks, custodians, and other financial institutions that clear and settle trades executed on behalf of their clients including individuals, institutions etc. 

Statistics  

On August 25, 2022, NSE Clearing Ltd. completed its 5587th Normal Settlement (Rolling T+2 following SEBI directive) Settlement Number N-2022159 and 122nd Normal Settlement (Rolling T+1) Settlement Number M-2022660. The following are the settlement statistics: 

NSCCL Total settlements

Conclusion

NSE Clearing is India’s largest clearing corporation and it was established to ensure the smooth clearing of all trades from various segments under the shed of NSE. It has been the backbone for billions of trade transactions in India. Settlement on the NSCCL platform is available in the following currencies mainly Dollars (USD), Euro (EUR), The British Pound (GBP) and The Japanese Yen (JPY). NSSCL will continue to fuel the seamless and strutured settlement of trade transactions in India.

We hope this article was helpful in appraising you about one of the biggest and yet unknown infrastructure players in India’s securities market. If you have any suggestions regarding the content, please drop your comments below.

Happy Investing! 

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