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National Securities Clearing Corporation Limited(NSCCL) – Objectives, Products settled

  • Amith G
  • Nov 10 2021
  • 6 minutes
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NSCCL stands for National Securities Clearing Corporation Limited which is the first clearing corporation to be introduced in India and also the first to introduce a settlement guarantee. NSCCL is now known as NSE Clearing Limited (National Clearing) and was originally incorporated in August 1995. It is a wholly-owned subsidiary of NSE and is formed with a certain vision to streamline the clearing process and safeguard the investor’s interests. 

What are the objectives of NSCCL?

NSCCL was initiated with the aim to provide robust and well-governed multi-asset class Central Counterparty (CCP) infrastructure that has a global presence. It aims at providing safe and efficient value-added services through strong risk management systems and processes as well as setting global benchmarks. The main objectives of NSCCL are highlighted below. 

  1. Providing and maintaining the confidence in clearing and settlement of securities
  2. Providing a counter-party risk guarantee
  3. Offering and maintaining short and consistent settlement cycles
  4. Managing risk through a secured risk containment system

How is settlement done through NSCCL?

NSE Clearing Limited is the medium to settle the trades of various products through a structured procedure. This procedure is well defined and no deviations are allowed under any circumstances. The process for settlement through NSCCL is mentioned below.

  1. At the start of the settlement procedure, NSCCL receives all the trades executed or locked in during the day for every trading day. 
  2. After receiving the details of all the trades, NSCCL then determines the cumulative obligation of every member.
  3. This data is then transferred electronically to the Clearing Members (CMs).
  4. Every trade concluded during a particular trading period is settled together for every member.  
  5. NSCCL then adopts a multilateral netting procedure that determines the net settlement obligation of every Clearing Member whether it is a delivery or receipt position.
  6. After this, the settlement procedure involves allocating the delivery of securities to arrive at the exact delivery and receipt obligations of funds as well as securities for every member of NSCCL. 
  7. The settlement procedure is completed when the pay-out of funds and securities is declared and released. 
  8. NSCCL requires the delivering members 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 the products settled through NSCCL?

NSCCL is the centralized clearing portal for various products traded on NSE. These products are not limited to the stocks listed on NSE but include much more. The available products that are settled through the NSCCL are stated below.

  1. Equities
  2. Security Lending and Borrowing Scheme (SLBS)
  3. Equity Derivatives
  4. Commodity Derivatives
  5. Currency Derivatives
  6. NSE Bond Futures on Government Bonds or T-Bills
  7. Debt segment
  8. Corporate Bonds 

What is the member admission process for NSCCL?

The membership of NSCCL is available to the following entities provided they fulfill the eligibility criteria laid down by SEBI and NSE.

  1. Individuals
  2. Partnership firms
  3. Limited liability partnership
  4. Corporate entities

The admission process for these eligible members to be a member with NSCCL is detailed hereunder. 

  1. The applicant will submit the application for new membership which is forwarded to the Membership Recommendation Committee (MRC).
  2. This application is forwarded to the Membership Selection Committee (MSC) and is sent for approval to the Membership Department of NSE/ NSCCL. 
  3. Upon approval, the offer letter for provisional membership is sent to the applicant.
  4. The Membership Department of NSE/NSCCL will also send the documents to SEBI for registration. 
  5. SEBI will then send a SEBI certificate to the Membership Department of NSE/NSCCL upon verification and registration which is then forwarded to the member.
  6. The member will further have to submit the enablement documents to the Membership Department following which the member will be enabled on the trading system.

Who are the partners of NSCCL?

The settlement process of NSCCL is a detailed and well-planned structure that has several participants having a specific role. The key participants in the settlement process of NSCCL are mentioned below.

Clearing member

Clearing members are the members of the Clearing Corporation. These members clear and settle deals through the Clearing Corporation for any segment based on the procedures and the prescribed terms and conditions.

Clearing bank

There are 15 partner banks that offer clearing services on the NSE Clearing platform. These banks are,

  1. Axis Bank Ltd.
  2. Bank of India
  3. Canara Bank
  4. Citibank N.A
  5. HDFC Bank
  6. Hongkong & Shanghai Banking Corporation Ltd.
  7. ICICI Bank
  8. IDBI Bank
  9. IndusInd Bank
  10. JPMorgan Chase Bank
  11. Kotak Mahindra Bank
  12. Standard Chartered Bank
  13. State Bank of India 
  14. Union Bank of India
  15. Yes Bank

Custodians

Custodians are another important participant in the NSCCL settlement process. These custodians are clearing members of NSCCL but not trading members. Custodians are charged with settling the trades on behalf of their clients. Custodians are required to confirm the settlement of the trade upon which the obligation for settlement is levied on them. If the settlement is not confirmed, the settlement obligation is levied on the trading member. 

Depository

Depositary participants are important as they are used to promote the dematerialization of the shares. NSE Clearing is linked to both the depositories in India namely, NSDL (National Securities Depository Limited) and CDSL (Central Securities Depository Limited) for electronic settlement of securities 

Professional clearing members

Professional clearing members (PCMs) are the clearing members but not trading members of NSCCL and are mostly banks or custodians who clear and settle the trades executed for their clients.

Conclusion

NSCCL is the clearing corporation of India and was introduced to ensure the smooth clearing of all the trades from various segments. The procedure of registration and settlement on the NSCCL platform is a definitive and well-oiled machine that does not accept any deviations or delays on any account. 

FAQs

What is NSCCL now known as?

NSCCL is now known as NSE Clearing Limited (NSE Clearing).

What is the credit rating of NSE Clearing Limited?

The credit rating for NSE Clearing Limited is ‘AAA’ allotted from CRISIL since 2008.

What are the currency pairs for which settlement is available on the NSCCL platform?

The settlement on the NSCCL platform is available on the following pairs of currency. 
US Dollars (USD)
Euro (EUR)
Great Britain Pound (GBP)
Japanese Yen (JPY)

 What are the two types of memberships allotted under NSCCL?

The two types of memberships allotted under NSCCL are,
Normal membership
Alpha membership

What are the trading categories available under alpha membership?

Under alpha memberships, the trading facilities available are under Cash Segment and Futures and Options Segments.

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