Settlement Mechanism
Daily Settlement Price, final settlement and mark to market settlement
Daily mark to market settlement and final settlement in respect of admitted deals in futures contracts shall be cash settled by debit/ credit of the clearing accounts of clearing members with the respective clearing bank. All positions (brought forward, created during the day, closed out during the day) of a clearing member in futures contracts, at the close of trading hours on a day, shall be marked to market at the daily settlement price (for daily mark to market settlement) and settled. All positions (brought forward, created during the day, closed out during the day) of a clearing member in commodity contracts, at the close of trading hours on the last trading day of the contract, shall be marked to market at final settlement price (for final settlement) and settled.
Funds settlement shall be effected through designated clearing banks of NCL. Every participant shall be required to have a separate settlement account with one of the approved clearing banks for commodity Derivatives Fund settlement. All the funds settlement will be conducted by effecting debits / credits through electronic transfer of funds in the accounts of participants� clearing bank accounts.
The pay-in and pay-out of mark to market settlement, final settlement of commodity derivatives, additional settlement shall be effected in accordance with the settlement schedule issued by the Clearing Corporation periodically. Along with mark to market settlement and final settlement of commodity derivatives there are few other transactions which are effected in settlement. The said transactions include EPI, Margin, Penalty, CTT, ABC/BC collection/release. These transactions are part of settlement which gets collected/released from/to member�s settlement account.
Funds Supplementary Settlement would happen on basis of Quality difference, Quantity difference, Delivery center, Packaging cost and penalty for short delivery. For such instances, NCL would create transactions and collect the same (Pay-in/Pay-out) from the clearing members. NCL will create funds transactions as a sum of compensation amount and replacement cost which is cumulatively termed as penalty and funds will be collected from the defaulting seller as a part of supplementary settlement.
NCL sends pay-in obligation reports to clearing banks on clearing day mentioning the details of transactions of members along with amount for arrangement of funds on settlement day.
Fund shortage handling
Buyer default is not permitted. Commodity pay-out shall not be executed to the receiver in case of fund shortage by the buyer
Pay-in and pay-out of commodities shall be executed through Vaults/ Warehouses empanelled by the Clearing Corporation from time to time. An online interface shall be provided to the members, Vaults and Warehouses for Commodity Inventory Management.
Delivery shortage handling
Penalty as specified by SEBI shall be levied on seller in case of delivery default (default in delivery against open position at expiry in case of compulsory delivery contracts, default in delivery after giving intention for delivery).NCL shall have appropriate deterrent mechanism (including penal/disciplinary action) in place against intentional/wilful delivery default.
Updated on: 16/04/2019
