DEPARTMENT: FUTURES & OPTIONS SEGMENT

Download Ref No: NCL/CMPT/55330 Date: January 20, 2023

Circular Ref. No: 008/2023

All Members,

Sub:- Guidelines for Net Settlement of Capital Market segment and Futures & Options (F&O)
segment upon expiry of stock derivatives

This has reference to SEBI circular SEBI/HO/MRD2_DCAP/P/CIR/2022/165 dated November 30,

2022, NCL circular NCL/CMPT/54663, dated November 30, 2022, and NCL consolidated circular
NCL/CMPT/55098, dated January 02, 2023. In view of the same the guidelines for net settlements are
as below:

a) Netting of Obligations:
1. Obligations in physical settlement of F&O segment for a particular expiry shall be netted with
Obligations in Capital Market segment of corresponding trade date.
2. The obligation shall be netted where the clearing member-trading member-client (UCC Code)
is common across Capital Market and F&O segments for the same security. The netting shall
not be done where trading member clears trades through different Clearing Member / Clearing
Corporation (Example of Netting Provided in Annexure A)
3. There shall be no change in computation of STT and Stamp duty and the same shall continue
to be levied for F&O physical and Capital Market separately as per the existing mechanism.

b) Securities settlement:
1. The net sell or buy obligations shall be settled in Capital Market segment in settlement/market
type and settlement number of Capital Market segment only.
2. Going forward NSE Clearing Ltd. (NCL) shall not issue separate settlement calendar for F&O
physical settlement and F&O physical Auction market.
3. Clearing members in F&O shall henceforth provide requests for voluntary auction for internal
shortages of F&O physical in settlement type, settlement number and security series applicable
in Capital market as per format specified in Annexure B.
4. Auto DO instructions shall not be provided by NCL with respect to incremental delivery
obligation for members/ custodians/ PCM, on T+1 day, on account of trades rejected by
custodians in Capital Market segment. Members/ Custodians shall ensure that they provide
manual pay-in instructions for such incremental obligation.

c) Funds Settlement:
1. Funds settlement shall happen from settlement bank account of Capital Market segment.
Clearing members should ensure to maintain active settlement account in the capital market
segment. For clearing members who have not designated NCL as clearing corporation in Capital
Market Segment, clearing members shall be required to open separate account for settlement
and inform the same to clearing corporation.
2. In case of fund shortages, the shortages shall be apportioned on the basis of the segment-wise
obligation of clearing member to NCL, on a pro-rata basis, to take action on shortages. The
losses, if any, in case of default of a clearing member to NCL shall be computed on the basis of
the segment-wise obligation of clearing member to NCL, on a pro-rata basis.

d) Margin benefit for offsetting positions:

1. The positions in stocks derivative contracts that are converted to settlement by delivery on
expiry in F&O segment and obligations in the underlying Capital Market segment shall be
allowed margin benefit to the extent of offsetting positions.
2. Such margin benefit shall be allowed only if the offsetting positions in a security at clearing
member-trading member-client (UCC) are common across Capital Market and F&O segments.
4. Margin benefit shall be provided on total margins in Capital Market segment and on delivery
margins in F&O Segment. (Example of benefit in margins is provided in Annexure C)
5. The margins on the residual positions (post netting) shall continue to be applicable in the
respective segments.
e) Early Pay-in (EPI) of Funds/Securities:
1. Members may provide early pay-in of funds from settlement bank account as mentioned in (c)
(1) above towards Capital Market segment settlement type only. The benefit of early pay-in
shall be provided as per below order
i. Early pay-in of funds shall be first considered in Capital Market segment.
ii. Residual amount of EPI of funds allocated at client/client-security level, if any, shall be
considered towards net buy obligations in F&O segment under the same clearing
member-trading member-client at such client level/client-security level, as the case may
be.
2. Early pay-in of securities for net sell obligation by way of block mechanism / pool mechanism
and client epi allocation request for pool epi shall be provided in market type and settlement
number of Capital Market segment only.
i. In case of upload of client EPI allocation file the members shall specify series as
applicable in capital market segment, for allocation of epi of securities done from pool
route.
ii. Benefit Early pay-in of securities shall be first provided in Capital Market segment.
iii. Residual Benefit early pay-in of securities, if any, shall then be considered towards net
sell obligations in F&O segment under the same Clearing member-Trading member-
Client at such security level.
3. Early pay-in of funds/securities in a segment shall be considered towards net obligations after
considering the offsetting positions as mentioned in (d) above.

f) Reports:
1. Existing Obligation reports (FOBG) before netting shall continue to be provided to members in
Capital Market and F&O segments.
2. Additional report with net obligation across Capital Market and F&O Segments shall be
downloaded to members. The file nomenclature and format shall be as given in Annexure D.
• On T day / Expiry day, net obligation reports shall be downloaded after the cut off
of OTR allocation in Capital Market segment.
 • The obligation report shall be based on netted obligation of F&O segment and
provisional obligation of Capital market segment based on deemed custodial
confirmation for CP / OTR trades.
• There shall be no change in the obligation for such members who do not have
CP/OTR trades in Capital Market Segment. For such members the report
downloaded on T day / Expiry day shall be final obligation. No obligation report
shall be downloaded to such members on T+1 day.
• For members who have CP/OTR trades in Capital Market Segment, in case of
change in obligation due to rejection/ non-confirmation of any CP/OTR trades by
custodian any time up to T+1 confirmation window, revised obligation report shall
be downloaded only for such impacted members and custodians on T+1 day, else
report downloaded on T day / Expiry day shall be final obligations

3. Delivery reports (DLVR) report for Capital Market segment shall be generated based on final
netted delivery obligation.

4. Reports specified in Annexure E shall be discontinued.

g) Do not Exercise facility:

The facility of do not exercise available for stock options on expiry date shall be discontinued.

The above changes shall be effective from March 2023 expiry of F&O contracts. Members are
requested to take note of the above.

For and on behalf of

NSE Clearing Limited

Prashant Shinde
Chief Manager

Telephone No Fax No Email id

1800 266 0050 +91-22-26598376 fao_clearing_ops@nsccl.co.in
 Annexure A
Example of netted obligation computation

1) Obligation in Capital Market Segment

Obligation in CM Segment
Quantity to Amount
CM TM Client Buy Buy Sell Sell +Receive / - +Receivable
Code Code Code Symbol Qty Value Qty Value Deliver / -Payable
M00001 TM1 AAA XYZ 0 0 80 20400 -80 20400
M00001 TM1 BBB XYZ 80 20400 0 0 80 -20400
M00001 TM1 CCC XYZ 0 0 100 25500 -100 25500
M00001 TM2* DDD XYZ 0 0 80 20400 -80 20400

2) Obligation in Futures & Options Segment

Obligation in F&O
F&O Positions on Expiry Segment
Quantity to Amount
CM TM Client Option Long Short Strike Set +Receive / - +Receivable
Code Code Code Symbol Type Qty Qty Price Price Deliver / -Payable
M00001 TM1 AAA XYZ CE 100 250 260 100 -25000
M00001 TM1 BBB XYZ CE 100 250 260 -100 25000
M00001 TM1 CCC XYZ CE 100 250 260 100 -25000
M00002 TM2* DDD XYZ CE 100 250 260 100 -25000
*TM2 is clearing through different Clearing member in CM and F&O segment
3) Netted Obligation
a) At Client Level
Obligation in CM Final Obligation in
Segment F&O Netted Obligation
Quantity Quantity
to + Amount + to + Amount + Quantity to Amount +
CM TM Client Receive / Receivable Receive / Receivable + Receive / Receivable
Code Code Code -Deliver / -Payable -Deliver / -Payable -Deliver / -Payable
M00001 TM1 AAA -80 20400 100 -25000 20 -4600
M00001 TM1 BBB 80 -20400 -100 25000 -20 4600
M00001 TM1 CCC -100 25500 100 -25000 0 500
M00001 TM2 DDD -80 20400 0 0 -80 20400
 Obligation in CM Final Obligation in
Segment F&O Netted Obligation
Quantity Quantity
to + Amount + to + Amount + Quantity to Amount +
CM TM Client Receive / Receivable Receive / Receivable + Receive / Receivable
Code Code Code -Deliver / -Payable -Deliver / -Payable -Deliver / -Payable
M00002 TM2 DDD 0 0 100 -25000 100 -25000

b) At TM Level
Obligation in CM Final Obligation in
Segment F&O Netted Obligation
Quantity Quantity
to + Amount + to + Amount + Quantity to Amount +
CM TM Receive / Receivable Receive / Receivable + Receive / Receivable
Code Code -Deliver / -Payable -Deliver / -Payable -Deliver / -Payable
M00001 TM1 -100 25500 100 -25000 0 500
M00001 TM2 -80 20400 0 0 -80 20400
M00002 TM2 0 0 100 -25000 100 -25000

c) At CM Level
Obligation in CM Final Obligation in
Segment F&O Netted Obligation
Quantity Quantity
to + Amount + to + Amount + Quantity to Amount +
CM Receive / Receivable Receive / Receivable + Receive / Receivable
Code -Deliver / -Payable -Deliver / -Payable -Deliver / -Payable
M00001 -180 45900 100 -25000 -80 20900
M00002 0 0 100 -25000 100 -25000
 Annexure B

File nomenclature: CM_SA_<DDMMYYYY>_nn.csv

Where DDMMYYYY = Auction Date
and nn is batch number of file (example 01)
File upload path on Member portal/FO/extranet_upld/voluntary auction
File Format:
Sr.No Field Name Data Size Remarks
Type
1 Settlement Type Char 1 For e.g. N (Normal Market)
2 Settlement Number Number 7
3 Security Symbol Char 10
4 Security Series Char 2 For e.g. EQ
5 CM Code Char 6 Clearing member code of CM
6 TM Code Char 5 Primary member code of CM
7 Filler NULL
8 Quantity for auction Number 7 Not exceeding the internal
shortage
If file uploaded is successful and any revisions are to be made, members should upload file with next
consecutive batch number. If the earlier file is rejected, then file should be uploaded with same batch
number. Members should ensure that every file should contain all records.

A. Return File to member

File nomenclature: <Primary Member Code>_CM_SA_<R/S>_DDMMYYYY_nn.csv
Where DDMMYYYY = Auction Date
and nn is batch number of file (example 01)
File upload path on Member portal/FO/extranet_dnld/voluntary auction
File Format:
Sr.No Field Name Data Size Remarks
Type
1 Settlement Type Char 1
2 Settlement Number Number 7
3 Security Symbol Char 10
4 Security Series Char 2 For e.g. EQ
5 CM Code Char 6
6 TM Code Char 5
7 Filler NULL
8 Quantity for auction Number 7
9 Response Code Char 2
10 Valuation Amount in Rupees Number (7,2)

Rejection Rejection Reason

Code
1 Member not permitted for auction
2 Settlement type mentioned in detailed record is not eligible for auction.
3 Mismatch in file nomenclature date and auction start date for mentioned
settlement type number combination in detail record
4 Invalid Batch Number
5 Obligation not yet generated for mentioned settlement type number
combination in detail record
6 Symbol series combination mentioned in detail record not valid on T day
7 Security not eligible for auction at permitted Exchange
8 Invalid CM code or Primary Member Code
9 Invalid quantity mentioned in file
10 Quantity mentioned not in accordance with market lot
11 Invalid detail record format
12 Window closed for settlement type and number
13 Security not eligible in auction
14 Duplicate Record
 Annexure C
Example of benefit in margins
1) Offsetting positions & EPI of securities 2) Offsetting positions & EPI of funds
Description CM F&O Description CM F&O
CM Code M50001 M50001 CM Code M50001 M50001
TM Code TM1 TM1 TM Code TM1 TM1
Client Code AAA AAA Client Code BBB BBB
Symbol XYZ XYZ Symbol XYZ XYZ
Buy Qty 80 0 Buy Qty 100 0
Buy Value 20,400.00 0.00 Buy Value 25,500.00 0.00
Sell Qty 0 100 Sell Qty 0 80
Sell Value 0.00 25,500.00 Sell Value 0.00 20,400.00
Net Quantity to Receive (+) / Net Quantity to Receive (+) /
80 -100 100 -80
Deliver (-) Deliver (-)
Net Value Receivable (+) / Net Value Receivable (+) /
-20,400.00 25,500.00 -25,500.00 20,400.00
Payable (-) Payable (-)
Eligible for offsetting YES Eligible for offsetting YES
Offsetting positions -80 80 Offsetting positions -80 80
Value of offsetting positions 20,400.00 -20,400.00 Value of offsetting positions 20,400.00 -20,400.00
Net Qty after offset 0 -20 Net Qty after offset 20 0
Net Value after offset 0.00 5,100.00 Net Value after offset -5,100.00 0.00
EPI of Securities 0 5 EPI of Securities 0 0
EPI of Funds 0.00 0.00 EPI of Funds 1,000.00 0.00
Net Qty after offset & EPI 0 -15 Net Qty after offset & EPI 16 0
Net Value after offset & EPI 0.00 3,825.00 Net Value after offset & EPI -4,100.00 0.00
Total Margin rate 20% Total Margin rate 20%
Close price of Symbol XYZ 265.00 Close price of Symbol XYZ 265.00
CM segment - Margins 0.00 N.A CM segment - Margins 820.00 N.A
CM segment - MTM Profit (+) / CM segment - MTM Profit (+) /
0.00 N.A 160.78 N.A
Loss (-) Loss (-)
CM segment - Total Margins 0.00 N.A CM segment - Total Margins 820.00 N.A
F&O segment - Margins N.A. 765.00 F&O segment - Margins N.A. 0.00
F&O segment - MTM Profit (+) / F&O segment - MTM Profit (+) /
N.A. -150.00 N.A. 0.00
Loss (-) Loss (-)
F&O segment - Delivery Margins N.A. 915.00 F&O segment - Delivery Margins N.A. 0.00
 Annexure D

1) Netted Detailed final obligation report to Trading member and Clearing member:

File Name for Clearing Member / Custodian:

<XXXXX>_DNETOBLG_SETTYPENO_DDMMYYYY.csv
File Name for Trading Member:
<XXXXX>T_DNETOBLG_SETTYPENO_DDMMYYYY.csv

Where:
<XXXXX> is the Member code / Custodian Code
SETTYPENO will be of Capital Market segment
DDMMYYY is the date of report generation
Settlement Type
Settlement Number
CM Code / Custodian Code
TM Code / CP Code
Client Code
Security Symbol
Security Series
Net Qty to Receive/-Deliver (CM Segment)
Net Value (CM Segment)
Net Qty to Receive/-Deliver (F&O Segment)
Net Value (F&O Segment)
Net Qty to Receive/-Deliver
Net Value
 2) Netted final obligation report to Clearing member:

File Name for Clearing Member / Custodian:

<XXXXX>_NETOBLG_SETTYPENO_DDMMYYYY.csv
Where:
<XXXXX> is the Member / Custodian Code
SETTYPENO will be of Capital Market segment
DDMMYYY is the date of report generation.

Settlement Type
Settlement Number
Security Symbol
Security Series
Net Qty to Receive/-Deliver (CM Segment)
Net Value (CM Segment)
Net Qty to Receive/-Deliver (F&O Segment)
Net Value (F&O Segment)
Net Qty to Receive/-Deliver
Net Value
 Annexure E

Sr
Name File name
no
Stamp Duty on Auction buyer
1 NCL_FO_SD05_<MEMBER CODE>_DDMMYYYY.CSV
for physical shortage
Auction Square Off Report to NCL_FO_<MEMBER
2
delivering member CODE>_ASQR_D_DDMMYYYY.csv
Auction Square Off Report to NCL_FO_<MEMBER
3
receiving member CODE>_ASQR_R_DDMMYYYY.csv
4 Auction Difference Report NCL_FO_<MEMBER CODE>_ADIF_DDMMYYYY.csv
Security Shortage report to NCL_FO_<MEMBER
5
receiving member CODE>_SHRT_R_DDMMYYYY.csv
Security Shortage report to NCL_FO_<MEMBER
6
delivering member CODE>_SHRT_D_DDMMYYYY.csv
CTM position Member
7 NCL_F_CTM_<MEMBER CODE>_DDMMYYYY.CSV
Download
Do not Exercise request
8 NCL_F_CTM_<MEMBER CODE>_DDMMYYYY.Tnn
Upload
Do not Exercise request NCL_F_CTM_<MEMBER CODE>_DDMMYYYY.Snn or
9
response Rnn
Early pay-in of securities
10 NCL_CLNTEPI_F_YYYYMMDD.Ynn
upload
Early pay-in of securities NCL_<Memcode>_CLNTEPI_F_YYYYMMDD.Snn or
11
response Rnn
Delivery Report in F&O F_<MEMBER
12
Segment CODE>_DLVR_SETTYPNO_DDMMYYYY.csv