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Clearing andsettlement of stock

exchange

by:

S . HARIBABU

MBA

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What is a Stock

Exchange?

Stock exchange is that placewhere trading of shares is donein terms of sale and purchase.

http://en.wikipedia.org/wiki/Image:Bombay-Stock-Exchange.jpg

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There are 23 stock exchanges in the India.

Mumbai's (earlier known as Bombay), BombayStock Exchange is the largest, with over 6,000stocks listed. The BSE accounts for over twothirds of the total trading volume in the country.Established in 1875, the exchange is also theoldest in Asia. Among the twenty-two StockExchanges recognized by the Government ofIndia under the Securities Contracts (Regulation)Act, 1956, it was the first one to be recognizedand it is the only one that had the privilege of

getting permanent recognition ab-initio.

BSE: The Bombay StockExchange

http://en.wikipedia.org/wiki/Image:Bombay-Stock-Exchange.jpghttp://en.wikipedia.org/wiki/Image:Bombay-Stock-Exchange.jpg

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Scrips at BSE

ACC AIRTEL

BHEL

DLF

GRASIM

GUJRAT AMBUJA

HDFC HDFC BANK

HINDALCO

HUL

ICICI BANK

INFOSYS

SUN Pharma IND. LTD

ITC L&T

MARUTI MAHINDRA & MAHINDRA

NTPC

ONGC

RANBAXY

RELIANCE COMMUNICATIO

RELIANCE INFRASTRUCTUR

RIL

STERLITE INDUSTIES LTD

SBI

TCS

TATA MOTERS

TATA STEEL

TATA POWER COMPANY LT WIPRO

http://en.wikipedia.org/wiki/Image:Bombay-Stock-Exchange.jpg

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NSE: National StockExchange

The National Stock Exchange (NSE), located inBombay, is India's first debt market. It was setup in 1993 to encourage stock exchange reformthrough system modernization andcompetition. It opened for trading in mid-1994.It was recently accorded recognition as a stockexchange by the Department of CompanyAffairs. The instruments traded are, treasury

bills, government security and bonds issued bypublic sector companies

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How are the SENSEX 30Stocks are selected?

Listing History

Trading Frequency

Rank based on the Market Cap (Should beAmong top 100)

Market Capitalization weight

Industry / sector they belong Historical Record

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NIFTY

The National Stock Exchange (NSE) is associatedwith NIFTY and it is also calculated by the samemethodology but with two key differences.

1. Base year is 1995 and base value is 1000.

2. NIFTY is calculated based on 50 stocks.

Everything else remains the same in NIFTY Index

calculation as well.

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Settlement agents

On each of the exchanges, thousands of ordersget matched with each other during the course

of a trading cycle.

Even though for each trade there is a buyer

broker and a seller broker, they never interact

with each other for the settlement of that trade.

Their interaction is only with the settlement

agency of their exchange.

When an investor enters into a transaction witha broker, either the shares or funds have to be

delivered to the broker.

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In turn, the broker delivers these to the settlement

agent on pay-in day (explained in the next

section).

Having made sure that it has received shares and

funds from all brokers, it processes the deliveries

and earmarks the shares for delivery to the buyerbroker.

For trades on BSE, the settlement agent is called

as Clearing House (CH) while on NSE it is

National Securities Clearing Corporation Ltd.(NSCCL)

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Clearing House Settlement Agent

of the BSE

The clearing and settlement operations of

the BSE is managed by a company called

BOI Share Holding, which is a subsidiary

of Bank of India and BSE and is known asClearingHouse.

All settlements for securities are through

the ClearingHouse on a delivery versus

payment (DVP) basis.

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National Securities Clearing

Corporation Settlement Agent of NSE

The clearing and settlement operations of the

NSE are managed by its wholly owned

subsidiary, the National Securities Clearing

Corporation Limited, also known as ClearingCorporation.

Common settlement processes on both

exchanges

The broker directly carries out settlements of

physical securities with the ClearingHouse/

Clearing Corporation.

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Settlement Cycle on the BSE

The settlement cycle on the BSE is Trade plus two

days, or T+2, as per a Sebi directive implementingthis new cycle from April 1, 2003.

Under rolling settlement, trades done on one day

are settled after a certain number of days.

So, T+2 will mean that the final settlement oftransactions done on the Trade day, will be settled

by exchange of money and securities on the

second business day (excluding Saturday,

Sundays, Bank and Exchange Trading Holidays).

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Pay-in and Pay-out for 'A', 'B1', 'B2', T,

S, TS, 'C', "F", "G" & 'Z' group of

securitiesSettlement is done on a T+2 basis. The pay-

in/pay-out process will be settled on the T+2

day.

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THANK YOU