In case a client wishes to maintain a running account for its funds with the trading member, the client has to authorize the member in writing to retain its funds. Such authorization should also contain:

• Mandate of the client as to whether the settlement of funds should be done on monthly / quarterly basis.
• A clause stating that the Client may revoke the authorization at any time (i.e.  without notice)

Running account authorisation received through online secured access by way of client specific user id & password or through a registered email id of client is considered as authorisation in writing.

Vide SEBI circular no. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2023/197 dated December 28, 2023, the settlement of running account of funds of the client shall be done by the trading member after considering the End of the Day (EOD) obligation of funds across all the Exchanges at the choice of the clients on quarterly and monthly basis, on the dates stipulated by the Stock Exchanges.

In accordance with aforesaid SEBI circular, Exchange issues circular every year informing the annual calendar applicable for the financial year for the settlement of running account (quarterly and monthly). The annual calendar issued by Exchange contains two dates (Friday and or Saturday) for each month/quarter on which member is required to carry out running account settlement of clients’ funds.

TM shall ensure that funds, if any, received from clients, whose running account has been settled, remain in the “Up Streaming Client Nodal Bank Account” and no such funds shall be used for settlement of running account of other clients. 

Further, as per SEBI Circular SEBI/HO/MIRSD/DOP/P/CIR/2021/577 dated June 16, 2021, for the clients having credit balance, who have not done any transaction in the 30 calendar days since the last transaction, the credit balance shall be returned to the client by trading member, within next three working days irrespective of the date when the running account was previously settled. Further, after settlement, if such client returns to the member with fresh funds and no trades are executed during this period, then members may compute the 30 calendar days for the purpose of subsequent settlement from the day the member receives funds instead of the last transaction date. However, member shall settle running account of client on the running account settlement dates as stipulated by Exchange of the quarter or month as per the preference of the client irrespective of date of his/her last transaction or receipt of funds. 

Illustration (For client accounts having credit balance and not traded in last 30 calendar days)

*Running account settlement date of the Quarter

If the client has an open position in the derivatives segment, then the date of contract expiry or the date on which position is closed may be treated as last transaction date, for the purpose of computing 30 calendar days for returning the credit balance to such clients. However, members shall ensure settlement of running account of funds on running account settlement dates as stipulated in the annual calendar issued by the Exchange of the Month or Quarter as per the preference of the client.

Illustration (For client accounts having credit balance and open position in derivatives segment)

*Running account settlement date of the Month

In case of client having any outstanding trade position on running account settlement date as stipulated in the annual calendar issued by Exchange of the Month / Quarter on which settlement of running account of funds is scheduled, a Trading member may retain funds calculated in the manner specified below:

1. Entire pay-in obligation of funds outstanding at the end of day on date of settlement, across all segments.
2. Member may retain 50% of end of the day (EOD) margin requirement as cash margin, excluding the margin on consolidated crystallized obligation/ MTM.
3. Apart from 50% cash margin mentioned in point ii above, member may also retain 225% of EOD margin (which includes additional 125% margin) reduced by 50% cash margin and the value of securities (after applying appropriate haircut) accepted as collateral from the clients by way of ‘margin pledge’ created in the Depository system for the purpose of margin and value of commodities (after applying appropriate haircut). The margin liability shall include the end of the day margin requirement in all the segments across exchanges excluding the margin on consolidated crystallized obligation/ MTM. The margin liability may also include the margin collected by the Member from their clients as per the risk management policy and informed to the clients.

Computation for arriving at retention of excess client funds based on above points would be as under: 

^ Excess securities need not to be unpledged.

An indicative format of retention statement is attached as Annexure 1. In case of any other format, members should ensure that the contents specified by the relevant circulars are covered in the retention statement.

Note:

a) Client’s running account shall be considered settled if member has given instructions to bank for credit to client’s bank account, provided that the member has sufficient balance in its account.

b) While computing the value of securities, the closing rate for the trade date prior to the settlement date (T-1 day) should be considered after appropriate hair-cut viz. VaR margin rate applicable for the security in the Capital Market segment.

c) In case the member applies haircut more than VaR rate on a regular basis and the actual margin is collected and exposure is provided accordingly, then such higher rate may be considered for determining the amount to be retained, provided the member has intimated the requirement of additional margins to the clients through the policy and procedures document and consistently through the daily margin statements issued to clients.

d) No inter client adjustment/ passing of Journal Entries can be done/ considered for the purpose of settling client accounts.

e) Obtaining of authorization from the clients to the effect that no settlement need be done for running accounts is contradictory to the SEBI requirement and hence not permissible.

f) with respect to computation stipulated above, following is clarified for the purpose of settlement of the clients carried out on Saturday (non-trading day):

• The outstanding pay in and margin obligation data of the last trading day shall be considered in the computation specified above e.g. the EOD outstanding pay in and margin obligation of last trading day i.e. Friday shall be considered for the purpose of settlement to be carried out on Saturday assuming Friday is not a trading holiday.
• Margin pledged securities as on settlement date i.e. Saturday shall be considered.
• Client Funds Balance as on settlement date i.e. Saturday shall be considered.
• While computing the value of margin pledged securities, the closing rate for T-1 trading day should be considered after appropriate hair-cut viz. VaR margin rate applicable for the security in the Capital Market segment. e.g. Closing rate of T-1 trading day i.e. Thursday shall be considered for settlement to be carried out on Saturday assuming Friday and Thursday are not a trading holiday.

Excess securities (in the form of margin pledge/re-pledge) with Trading Member (TM), Clearing Member (CM) or with Clearing Corporation (CC), after adjustment of the 225% of the margin liability need not be unpledged for the purpose of periodic settlement.

For the purpose of settlement of funds, the mode of transfer of funds shall be by way of electronic funds transfer viz., through National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), etc.

Members may issue a physical payment instrument (cheque or demand draft), only in cases where electronic payment instructions have failed or have been rejected by the bank and after keeping adequate record of the same.

Further, in case of failure of electronic payment instructions due to incorrect bank account details, members shall obtain correct bank details from clients and update their records after keeping adequate audit trail.

No. Retention of any amount towards administrative / operational difficulties in settling the accounts of clients is not permitted.

As clarified vide Exchange circular NSE/INSP/47227 dated February 03, 2021, every member shall send a complete ‘Statement of Accounts’ for funds, securities and commodities in respect of each of its clients on weekly basis. Members have to send the ‘Statement of Accounts’ on or before the next four trading days of subsequent week.

Further all members will continue to send ‘statement of accounts’ containing an extract from the client ledger for funds, an extract from the register of securities/commodities displaying all receipts and deliveries of securities/commodities and a statement explaining the retention of funds/commodities within 5 days from the date of settlement.

Notwithstanding anything contained above, Member shall issue the statement of accounts for funds, securities and commodities for such period as may be requested by the client from time to time.

The statement of accounts may be sent in hard or in soft form as per the consent obtained from the client and POD / dispatch register / logs of email sent should be retained by the member.

Members may refer Exchange circular NSE/INSP/47227 dated February 03, 2021, for the format of the statement of accounts for funds and securities/commodities.

The members shall not be required to send the ‘Statement of Accounts’ to clients with zero funds, zero securities and zero commodities balances and no trades are carried out by the client in the last 12 months across all Exchanges.

The periodic settlement as per the above- mentioned rules (Point no.1) is not required to be done in the following cases:

• Clients settling trades through “custodians.”
• Margin received in the form of Bank Guarantees in accordance with SEBI guidelines on upstreaming of clients funds which are created by clients 
• Clearing members who are clearing trades of custodial participants/ trading members
• Cheques received by the Member from the clients and credited in the respective client ledger but uncleared on settlement date.
• In the case of new client, no settlement would be required on first settlement date (i.e. running account settlement date as stipulated by Exchange of the Month or Quarter as per the preference of client) immediate after registration of client. For example, a client who registered on October 01,2024 and opted quarterly settlement, would not be required to be settled on the first settlement date i.e. October 04 & 05,2024 and should be settled on next settlement date i.e. January 03 & 04 ,2025. However, members shall ensure that, if the client is having credit balance, and has not done any transaction in the 30 calendar days since the last transaction, the credit balance shall be returned to the client by TM, within next three working days.

While settling client accounts, a member cannot retain funds in excess of the balances mentioned in Point 5.

Accordingly, while ascertaining retention amount, a member cannot consider debit balances of the client which are arising in the books of sister concern / associate of the member registered in same/other exchanges / commodities broking.

No. All Members are advised to strictly comply with the abovementioned requirement relating to running account settlement and ensure strict adherence to the timelines prescribed therein. Further, members should ensure to credit the settlement amount to the client bank account directly and not run any schemes to invest the actual settlement amount with the consent/without consent of the client.

Annexure 1

INDICATIVE FORMAT FOR RETENTION STATEMENT

(A) Total value of clients Funds available prior to settlement

(B) Value of securities pledged/ repledged and value of commodities

(C) Explanation regarding Retention of Funds

(D) Retention of Funds

     (E) Details of Payout to client

                                               (F) Amount not required to be returned