Clearing, Delivery, Settlement and Depository
What the domain tests
This domain covers the post-trade chain: confirming and clearing trades, managing risk, delivering securities and paying cash, and holding securities in book-entry form. Expect questions that distinguish clearing from settlement and NCCPL from CDC.
Core rules
- NCCPL operates the clearing and settlement system. It confirms trades, calculates obligations, applies multilateral netting, collects margins and manages settlement risk.
- CDC operates the Central Depository System. Securities are immobilised or held in book-entry form and moved between participant accounts, including broker sub-accounts and investor accounts.
- Settlement is on T+2 and uses delivery versus payment: securities and funds are exchanged so that one leg is not left uncompleted.
- A UIN issued through NCCPL identifies the client for trading and reporting. Brokers must maintain accurate client and sub-account records.
- Clearing determines what each participant owes; settlement discharges that obligation.
Worked example
On Monday a client buys 1,000 shares at Rs 50 through a broker. The trade is executed on Monday. NCCPL clears the trade, nets the broker’s obligations and sets the settlement date as Wednesday (T+2, assuming no intervening holiday). The broker pays the clearing obligation and receives the shares into its CDC sub-account; the client pays the broker and the shares are credited to the client’s account. The client does not receive a physical certificate, and the issuer does not receive the Rs 50,000.
Traps
Using “clearing” and “settlement” interchangeably; assuming physical certificates are the normal delivery method; miscounting T+2 across holidays; forgetting that the broker’s settlement obligation to NCCPL is separate from the client’s obligation to the broker.