Products & Services
Clearing & Settlement Services
Clearing and Settlement of ready/cash market Trades and Non-Exchange Transactions:
NCCPL provides clearing and settlement services to the Pakistan Stock Exchange Limited through its centralized clearing & settlement system known as National Clearing and Settlement System (“NCSS”). All trade / transactions are settled in NCSS on the settlement date on Delivery vs Payment (DVP) basis:
Trades and transactions settled by NCSS, under Balance Order Multilateral Netting mechanism with T+2 and T+1 settlement cycle, are of two types:
A. Exchange Trades are locked-in contracts between Members executed through the exchange trading system.
B. Non-Exchange Transactions are generated in NCSS based on underlying exchange Trades/Transactions and are classified into following:
Institutional Delivery System (IDS) Non-Exchange Transactions: Through this functionality, Institutions (NBCMs) can avail facility of Direct and Streamline Settlement of trades/transactions executed by their Members in the Ready and Futures Market. Once a trade is executed by Member of an Exchange on behalf of NBCM of NCCPL, such trade once transmitted in NCSS is auto-initiated in favor of respective NBCM for their affirmation. Upon its affirmation by NBCM, settlement obligation is shifted on affirming NBCM. In case of non-affirmation/rejection by NBCM, such transaction(s) is settled by initiating Member on respective settlement date.
- Balance Order T+2 rolling settlement cycles with multilateral netting.
- Automated Pay & Collect by direct debit and credit in the settling bank accounts.
- No physical receipt / issuance of instruments
- Automated process of securities settlement directly between Clearing Members (CM).
- Direct securities move-in and move-out on the basis of CDS accounts based on Unique Identification Numbers
- Registration of Unique Identification Number (UIN) of all clients with codes
- Bought securities are delivered to buying CMs’ CDS sub-account and/or house-accounts in blocked-status till fulfillment of all settlement obligations.
- Similarly, money credited to selling CMs’ settling bank account after the fulfillment of all settlement obligations.
Clearing and Settlement of Deliverable and Non-Deliverable Futures Contracts:
Clearing & Settlement of Futures Contracts such as Deliverable Futures Contract (DFC), Cash Settled Futures Contract (CSFC) and Stock Index Futures Contract (SIFC) are also managed by NCCPL. Moreover, collection of daily Marked-to-Marked Losses and distribution of profits on such NDFC are also managed by NCCPL.
At the close of each NDFC, NCCPL collects final losses from all Clearing Members through its automated pay & collect module of NCSS. Accordingly, final profits at the end of each NDFC are also distributed by NCCPL to Clearing Members through its automated pay & collect module of NCSS.
Clearing and Settlement of Bonds Automated Trading System (BATS):
Trades in Debt Market Securities are executed by the Clearing Members through Bond Automated Trading System (“BATS”) of the Pakistan Stock Exchange Limited.
Clearing & Settlement and risk management of trades executed by Clearing Members on BATS are handled by NCCPL through its NCSS as per the following mechanism:
- Trades executed by Clearing Members on BATS are settled through NCSS on the basis of Trade-for-Trade T+1 settlement cycle.
- A separate Clearing Account is required to open in NCSS by a Clearing Members exclusively for clearing & settlement and risk management of trades executed on BATS.
- Institutional Delivery System (“IDS”) facility of NCSS is also made available for the clearing and settlement of trades of NBCMs.
- On the Settlement Date, Balance Order for every Debt Market Trade is generated on gross basis whereby Clearing Member is required to deliver and/or receive each and every trade even in the same Security separately on Trade-for-Trade basis.
- NCSS generates separate money payable and receivable on gross basis for each Clearing Member for each Balance Order generated on Trade-for-Trade basis.
- Upon fulfillment of payment obligation by Clearing Member, securities are transferred into respective buying Clearing Member CDS Account.
- Upon fulfillment of delivery obligation by Clearing Member, NCSS credit funds into respective selling Clearing Member’s settling bank account.
Custodian Banks dealing with the custody and settlement of stock market trades of Foreign Clients (FCs) have now been inducted as Custodian Clearing Members (CCM) of NCCPL. Accordingly, all trades executed by such foreign clients through Members are settled by their CCM directly through NCSS in the following manner:
Initiation and Affirmation Process
- Trades of FCs executed by their respective Members are initiated by such Members on the trade day, through a separate and exclusive Institutional Delivery System of Custodians (“IDSC”) module in NCSS in favor of the respective CCMs.
- Initiated trades are made available for affirmation to the respective CCMs through IDSC module of NCSS. The CCMs accordingly affirm and/or reject such initiated transactions on T+1. However, spot trades need to be affirmed by CCMs on Trade Day.
Clearing & Settlement
Upon affirmation of transactions by CCM, these are settled directly by them with NCCPL on the respective settlement date. Un-affirmed/rejected transactions, if any, are settled by the initiated Member on respective settlement date.
Clearing and Settlement of Negotiated Deal Market (NDM) Market:
Members of the Pakistan Stock Exchange Limited are required to record their off-market trades in listed securities through Negotiated Deal Market (“NDM”), provided by stock exchange. Clearing and settlement of such NDM trades are also managed by NCCPL.
The main features of Clearing & Settlement of NDM Trades through NCCPL are as follows:
- NDM trades are recorded by Members at Stock Exchange in a disclosed basis whereby buyer and seller are known to each other.
- Settlement Cycle of NDM trades is ranging from T+0 to T+60.
- Upon execution of NDM trades, Stock Exchange transmit such trades on-line to NCSS.
- NCCPL provides facilitation of Non-Exchange Transactions such as Broker-to-Broker, Institutional Delivery System on such NDM Trades (excluding NDM T+0 Trades).
- NDM trades are settled on the basis of TRADE FOR TRADE settlement mechanism of NCSS and no netting is permissible across positions in NDM and any other Market.
- For the Securities settlement of NDM trades, NCSS generates gross deliver and receive Balance Order of every NDM trade.
- For the money settlement of NDM trades, NCSS generates gross payable and receivable of each Member.
- On the Settlement Date, NCSS passes debit instruction to the settling banks through Pay & Collect Module of NCSS for the collection of payment from the respective Member.
- Upon fulfillment of payment obligation by Member, NCSS transmits instructions to CDC for movement of Securities from respective selling Member CDS Account to the respective buying Member CDS Account.
- In case of none or partial payment confirmation by settling banks, NCSS does not pass instructions to CDC for movement of securities for particular Member.
- Upon fulfillment of delivery obligation by Member, NCSS passes an exclusive set of instructions to the settling banks for the payment of funds from NCCPL settling bank account to the respective Members settling bank account.
- In case of none or partial delivery confirmation by CDC, NCSS does not pass instructions to the settling banks for funds transfer to particular Member.
- Pre-Settlement Delivery Facility
Pre-Settlement Delivery (“PSD”) functionality has been implemented through NCSS whereby Members are given an option to deposit net-sold securities per UIN-wise with NCCPL on trade date. Consequently, NCSS delivery obligation and margin requirements, to the extent of such PSD, shall not be taken into account by the stock exchange and NCCPL.
- Insitutional Delivery System
Through this functionality, Institutions (NBCMs) can avail facility of Direct and Streamline Settlement of trades/transactions executed by their Members in the Ready and Futures Market. Once a trade is executed by Member of an Exchange on behalf of NBCM of NCCPL, such trade once transmitted in NCSS is auto-initiated in favor of respective NBCM for their affirmation. Upon its affirmation by NBCM, settlement obligation is shifted on affirming NBCM. In case of non-affirmation/rejection by NBCM, such transaction(s) is settled by initiating Member on respective settlement date.
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