Please refer to the SEBI circular dated 27 July 2022 (Circular No.: SEBI/HO/MIRSD/DoP/P/CIR/2022/101) regarding "Settlement of all clients needs to be done at broker end on 1st Friday of every Quarter" which is applicable from 7th October 2022.
As per exchange, 225% of EOD margin for that day for any client or pay-in obligation to exchange can be retained and rest all funds have to be transferred back to client's bank accounts for the purpose of settlement. Further for collateral clients up to 50% cash component can be retained against margin used and the rest has to be transferred back to the client.
Process Involved for settlement of all clients on a single day.
As you are aware SEBI had recently bought in the concept of allocation of client funds where all funds are required to be deposited with the exchange and then allocated at client level for trading. For settlement, funds will be unallocated and released from the Exchange post trading hours on Friday and then transferred back to clients. Looking at EOD margin and pay in obligation for our clients on 1st Fridays of previous months, it is estimated that almost 70% of total client funds would be transferred back to the clients to comply with this circular on Friday.
Further, these are funds of active clients (30-day settlement for inactive clients already being done at broker level ) so most of the funds would come back on Saturday/ Monday. Very high volume of transactions and a huge amount of inflow is expected on Saturday/Monday. Clients are advised to transfer funds back to Trading Account on Saturday for smooth Trading on Monday as we would be transferring these incoming client funds to exchange to get limits for allocation and then only would be able to open trading limits for clients. Please note we have almost 20% of overall clients' funds as our own funds in the system which we use to settle clients, manage exchange payin payout and further manage exchange limits but don't know if that would suffice to manage almost 60-70% funds flow to and from the client.
Impact on Trading for Clients
Please note funds transferred to us for Trading on the following Monday/Tuesday post settlement might take time to be updated as we would be transferring those to exchange first in batches to get allocation limit and then updating on Trader.
Further from now onwards funds transferred would be available for trading as usual but any payout would happen on T+1 as we would be unallocating at the exchange level by EOD and then processing payout
Lastly, clients are requested to manage margin in their accounts beforehand for trading on Monday/Tuesday post settlement. Collectively huge amount of funds running into thousands of crores would be released from the exchange on that day and further paid out to clients for settlement across brokerages. Again this fund would flow back into the system and further to the exchange on Saturday/ Monday. We are hoping all Brokers / Exchanges and Bank portals would be able to handle such a huge number of transactions and volumes without downtime or disruption
* Clients will be auto-settled only in case the cash margin in account is less than 225% of margin used or against the pay-in obligation to exchange. Further no need to unpledge shares for settlement under Margin Pledge Mechanism within the DP system
** Clients are advised to transfer funds back to Trading Account on Saturday for smooth Trading on Monday as we would be transferring these incoming client funds to exchange to get limits for allocation and then only would be able to open trading limits for clients
*** Note that though the 2nd SAT is Bank Holiday, online transactions will be active
# Traders please update your Daily Transfer Limits with your respective Banks according to the amount you keep in your Trading Account to avoid any last-minute hassles
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