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Market Transfers

Trading in dematerialised securities is quite similar to trading in physical securities. The major difference is that at the time of settlement, instead of delivery/receipt of securities in the physical form, the same is affected through account transfers.

Delivery of securities to or from a clearing member are called "Market Trades" in the depository system. A simple way of determining whether a trade is a market trade is that, either source or target in a transfer instrument is a CM account; such a transfer is a “Market Trade”

Market Transfer for Retail Investors

In the diagram, the selling client and clearing member1 have their respective accounts with DP1 and the buying client and clearing member2 have their respective accounts with DP2. DP1, DP2 and the Clearing Corporation/ Clearing House have on line electronic connectivity with NSDL. The following paragraphs, explain the flow of securities to effect settlement of a market trade

Step-1

Seller gives delivery instruction to DP1 to debit his account and transfer securities to "Clearing Member1 Pool A/c" with DP1. [Clearing Member1 gives corresponding receipt instruction to DP1 to accept in his clearing account securities transferred by seller through DP1 if he has not already given standing receipt instruction for all credits into his clearing account.]

Step-2

Securities are transferred from "Selling Client A/c" to "Clearing Member1 Pool A/c" with DP1.

Step-3

Clearing Member1 gives delivery to CC instruction to DP1 to debit his "Clearing Member1 Pool A/c" and credit his "Clearing Member1 Delivery A/c". The transfer will take place on the "execution date" mentioned in the instruction. Delivery to CC instruction to be given as per final/ net delivery obligation.

Step-4

Securities lie in the "Clearing Member1 Delivery A/c" till settlement day. At the time of pay-in, securities lying in "Clearing Member1 Delivery A/c" are automatically flushed to the Clearing Corporation/ Clearing House. No debit instruction is needed for this transfer. The deadline time for pay-in of securities to the Clearing Corporation/ Clearing House may vary from one exchange to another.

Step-5

At the time of pay-out securities are transferred from the Clearing Corporation/ Clearing House to "Clearing Member2 Receipt A/c" with DP2. No credit instruction is needed because this transfer is automatic.

Step-6

Securities are transferred from "Clearing Member2 Receipt A/c" to "Clearing Member 2 Pool A/c". Receipt account of clearing members is purely a transit account for maintaining audit trail.

Step-7

Clearing Member2 gives a delivery instruction to DP2 to debit his "Clearing Member 2 Pool A/c" and credit "Buying Client A/c" with DP2. [Buyer gives corresponding receipt instruction to DP2 to accept in his account securities transferred from "Clearing Member2 Pool A/c" through DP2 unless he has not given a standing instruction to receive credits to his account.]

Note: - Funds are not handled by NSDL. Clearing Member2 obtains cheque from buyer and gives it to the Clearing Corporation/ Clearing House. Only after the cheque is cleared by clearing bank, the Clearing Corporation/ Clearing House allows credit of securities to clearing member2 and thereafter, communicates the match to NSDL.

Step-8

Securities are transferred to "Buying Client A/c" from "Clearing Member2 Pool A/c" with DP2. Note: Until delivery instruction is given by the clearing member, the securities will remain in his "Pool A/c". However, if they are not transferred to a "Beneficial Owner A/c", the securities will not be eligible to any corporate benefits like bonus, dividends, etc.

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Bye-Law 9.6: Transfer of balances

Business Rule 12.2 : Market trades

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  • For a transfer of securities to be effected from one account to another, details mentioned in the "delivery" and "receipt" instructions need to match. Investors need to be especially careful with respect to the "execution date" mentioned in the two forms. The transfer would be rejected if there is a mismatch in this regard even if all other details in the two forms match. However, if standing instruction facility for receipt has been activated, this may be ignored.
  • Investors need to be careful with respect to the pay-in deadline.
  • While the selling client fills the delivery form, he must take care to
    • Strike off the portion for 'For Off-Market Trades (Receiver Details)' and fill up all other details completely.
    • Ensure that only delivery instruction form given by the DP having the pre-printed Serial no. is used. Do not use the form belonging to another client. If loose delivery instruction slips are used by the client; he should obtain it directly from his DP after proper identification.
    • Ensure that his Client ID and DP's 'DP ID' is available on the form. This would be printed/stamped by his DP.
    • Write the CM-BP-ID, name of the clearing member, market type and settlement number as given by the clearing member in the portion 'For Market Trades (Receiver Details)'.
    • Write the ISIN of the security, which is to be transferred. This ISIN will be available in the statement of account received from the DP giving details of the security holding.
    • Write the security name as it appears in the statement of account.
    • Write the quantity both in figures and words.
  • Execution date is the date on which the transfer should take place. This should be on or before the delivery date prescribed by the clearing member.
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In a clearing account, the securities are always kept in a bucket of specific market type and settlement number. Hence, the clearing member may have to move securities from one bucket with a different market type-settlement number combination to another bucket from where pay-in is to be effected. To effect this movement a clearing member can give an instruction to move securities from one settlement to another settlement. For e.g., 100 shares of INE002A01018 (Reliance Limited) can be transferred from Market Type Physical Settlement Number 1999048 to market type Rolling Settlement Number 1999251.

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Step-1

Clearing Member gives "inter settlement instruction" to his DP. The instruction should clearly indicate the market type & settlement no. from which the securities are to be moved and the market type & settlement no. to which the securities are to be moved. Please note that, securities can be transferred only to a settlement whose deadline for pay-in is not complete. In other words, it means that securities can be transferred only to a current or future settlement and not to an old settlement.

Step-2

The DP will ensure that the instruction slip is complete & the signature of the CM is valid.

Step-3

The DP will execute the instruction & securities will be moved within the pool a/c of the CM as per the instruction.

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A Clearing Member can transfer securities from its account to any other Clearing Member’s account of any stock exchange connected to NSDL.

Step-1

Clearing Member gives "CM Pool to CM Pool Delivery Instruction" to his DP to debit its Pool account and credit the Pool account of another Clearing Member. The instruction should clearly indicate the market type & settlement no. from which the securities are to be moved and the CM-BP-Id, market type & settlement no. to which the securities are to be moved. Please note that, securities can be transferred only to a settlement whose deadline for pay-in is not complete. In other words, it means that securities can be transferred only to a current or future settlement and not to an old settlement. Receiving Clearing Member gives corresponding receipt instruction to its DP to accept in his clearing account securities transferred by delivering Clearing Member if he has not already given standing receipt instruction for all credits into his clearing account.

Step-2

The DP will ensure that the instruction slip is complete & the signature of the CM is valid.

Step-3

The DP will execute the instructions of the Clearing Member to debit/credit the Pool account of the Clearing Member.

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