Clearing and settlement takes wing

NSCCL, a wholly-owned subsidiary of the National Stock Exchange of India Ltd. (NSE), carries out the clearing and settlement of the trades executed in the CM segment of NSE and operates constituent SGL for settlement trades in government securities.

Settlement: NSCCL successfully completed all the settlements without any delay or deferment.

The average value of securities handled per settlement increased from Rs. 1,248 crores in 1998-99 to Rs. 1,520 crores in 1999-00, a rise over 20 per cent.

AThe average funds pay-in amount increased from Rs. 233 crores to Rs. 510 crores during the same period.

The average number of shares processed per settlement increased by 73 per cent from about 527 lakh in 1998-99 to 910 lakh in 1999-00.

Short deliveries averaged around, 1.29 per cent of the total delivery. Various measures initiated by NSE and NSCCL helped to reduce bad deliveries.

The ratio of bad deliveries to net deliveries progressively declined from 0.25 per cent in March 1999 to 0.15 per cent in March 2000.

The Settlement Guarantee Fund stood at Rs. 1,391 crores as on March 31, 2000 compared to Rs. 583 crores at the end of 1998-99.

Certificates handled: In order to provide a level playing field to members irrespective of their location, NSCCL moves securities in the normal pay-in and pay-out on behalf of the Clearing Members from and to Regional Clearing Centres (RCC) and Central Clearing Centre (CCC) at Mumbai.

NSCCL handled around 3.75 crore certificates during the year despite tremendous increase in demat settlement as against 3 crore during the preceding year. The number of certificates handled at CCC were 1.73 crore averaging around 14.4 lakh in a month and 3.60 lakh in a settlement. The movements of documents among RCCs and between RCCs and CCC accounted for 27.61 per cent of the total certificates handled.

Pre-delivery verification: NSCCL was the first to start pre-delivery verification in order to detect bad papers in the nature of fake and forged certificates or lost and stolen share certificates. During the year, the verification was extended to 183 securities. Fake and forged certificates were detected in respect of five securities and lost and stolen in respect of 41. A total of 3.8 lakh securities with a value of Rs. 275 lakhs were detected during the year.

Dematerialised settlement: The only effective solution to the problem of fake/forged and stolen shares was dematerialised trading and settlement. As SEBI made demat settlements mandatory in an ever increasing number of securities in a phased manner, the proportion of shares delivered in dematerialised form increased.

The share of demat delivery in total delivery based settlement increased from 21 per cent in 1998-99 to 53 per cent in 1999-2000 in terms of quantity and 17 per cent to 81 per cent in terms of value.

During March 2000, 90 per cent of delivery was effected in demat form. This indicates that there is an increasing preference to settle trades, particularly in high value scrips, in demat form. Such high level of demat settlement reassures success of rolling settlement.

In the depository rolling segment, 268 settlements amounting to Rs. 2193 crores were handled successfully.

Risk management: The risk containment measures were further strengthened during the year. A risk group was constituted to identify additional areas of perceived risk and intensified the monitoring of members' position having concentration in certain high risk securities, which attract high volumes and volatility.

Also a structured exercise of requiring unusually high pay-in liability members to make advance pay-in of funds has been put in place, in addition to offering facility of early pay-in of securities in demat mode.

Securities lending/borrowing: The automated lending and borrowing mechanism of NSCCL provides a facility to lend/borrow securities/ funds at market determined rates with a view to facilitating timely delivery of securities to improve the efficiency of the system. NSCCL successfully completed 56 settlements for 11.30 lakh shares amounting to Rs. 87.40 crores by end of 1999-2000. 585 Clearing Members have been registered as participants.

Professional clearing membership: NSCCL started the Professional Clearing Membership and Stock Holding Clearing Corporation Ltd. has been admitted as the first professional clearing member on CM Segment.

Derivatives settlement: As the legal framework for launching derivatives market is now in place, NSCCL has prepared itself to provide clearing and settlement services including risk management for this market.

Multiple depositories: The Central Depositories Securities Limited (CDSL) was connected to the NSCCL during the year and clearing and settlement of securities in dematerialised form through CDSL was introduced from March 1.

Clearing banks: During the year, Indusind Bank was admitted as a new clearing bank to provide wider choice in clearing and settlement services to the clearing members. This brings the number of clearing banks to four.

Collateral FDRs: NSCCL started accepting FDRs drawn in its favour and maintaining its custody. This has added value in services to the members as they would no more be required to pay custodial charges and they can be given instantaneous credit and benefit.

(Edited extracts from NSE NEWS published by the National Stock Exchange of India.)