Trading, Clearing & Settlement Process | Derivatives on Stock Market
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18 December 2017

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Derivatives

Derivatives


Futures


Options


  More About Derivatives

Trading, Clearing & Settlement

Trading on the derivatives segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the derivatives segment are:

Normal market / Exercise market open time : 09:15 hrs

Normal market close time : 15:30 hrs

Setup cutoff time for Position limit/Collateral value : 16:15hrs

Trade modification / Exercise market end time : 16:15hrs

Note: The Exchange may however close the market on days other than the above schedule holidays or may open the market on days originally declared as holidays. The Exchange may also extend, advance or reduce trading hours when its deems fit and necessary.

Price Bands

There are no day minimum/maximum price ranges applicable in the derivatives segment. However, in order to prevent erroneous order entry, operating ranges and day minimum/maximum ranges are kept as below:

  • For Index Futures: at 10% of the base price
  • For Futures on Individual Securities: at 10% of the base price
  • For Index and Stock Options: A contract specific price range based on its delta value is computed and updated on a daily basis.
In view of this, orders placed at prices which are beyond the operating ranges would reach the Exchange as a price freeze.

Trading System

The Futures and Options Trading System provides a fully automated trading environment for screen-based, floor-less trading on a nationwide basis and an online monitoring and surveillance mechanism. The system supports an order driven market and provides complete transparency of trading operations.

Order Conditions


Time Conditions

DAY -

A Day order, as the name suggests, is an order which is valid for the day on which it is entered. If the order is not matched during the day, the order gets cancelled automatically at the end of the trading day.

IOC -

An Immediate or Cancel (IOC) order allows a Trading Member to buy or sell a security as soon as the order is released into the market, failing which the order will be removed from the market. Partial match is possible for the order, and the unmatched portion of the order is cancelled immediately.

Price Conditions


Limit Price/Order -

An order that allows the price to be specified while entering the order into the system.

Market Price/Order -

An order to buy or sell securities at the best price obtainable at the time of entering the order.

Stop Loss (SL) Price/Order -

The one that allows the Trading Member to place an order which gets activated only when the market price of the relevant security reaches or crosses a threshold price. Until then the order does not enter the market.

Other conditions

- Market price: Market orders are orders for which no price is specified at the time the order is entered (i.e. price is market price). For such orders, the system determines the price.

- Trigger price: Price at which an order gets triggered from the stop-loss book.

- Limit price: Price of the orders after triggering from stop-loss book.

- Pro: Pro means that the orders are entered on the trading member’s ownaccount.

- Cli: Cli means that the trading member enters the orders on behalf of a client.

Clearing Mechanism:

A Clearing Member's open position is arrived by aggregating the open position of all the Trading Members (TM) and all custodial participants clearing through him. A TM's open position in turn includes his proprietary open position and clients’ open positions.

Settlement Schedule

The settlement of trades takes place on T +0/ T+1 working day basis at the discretion of the member.

Members with a funds pay-in obligation are required to have clear funds in their primary clearing account before the stipulated Payin time. on the settlement day. The payout of funds is credited to the primary clearing account of the members thereafter.
Product Settlement Schedule
Futures Contracts on Index or Global Index Individual Security Daily Settlement Closing price of the futures contracts on the trading day. (closing price for a futures contract shall be calculated on the basis of the last half an hour weighted average price of such contract)
Un-expired illiquid futures contracts (including Global Indices) Daily Settlement Theoretical Price computed as per formula F=S * ert
Futures Contracts on Index or Individual Securities Final Settlement Closing price of the relevant underlying index / security in the Capital Market segment of NSE, on the last trading day of the futures contracts.
Futures Contracts on Global Indices (S&P 500 and DJIA) Final Settlement The Special Opening Quotation (SOQ) of the Global Indices S&P 500 and DJIA on the last trading day of the options contracts
Options Contracts on Index and Individual Securities Final Exercise Settlement Closing price of such underlying security (or index) on the last trading day of the options contract.
Options Contracts on Global Indices Final Exercise Settlement The Special Opening Quotation (SOQ) of the Global Indices S&P 500 and DJIA on the last trading day of the options contracts

Settlement Mechanism


Daily MTM settlement for Futures

All futures contracts for each member are marked-to-market (MTM) to the daily settlement
price of the relevant futures contract at the end of each day. The profits/losses are computed as the difference between:
1. The trade price and the day’s settlement price for contracts executed during the day but not squared up.
2. The previous day’s settlement price and the current day’s settlement price for brought forward contracts.
3. The buy price and the sell price for contracts executed during the day and squared up. Daily settlement price on a trading day is the closing price of the respective futures contracts on such day.

Final settlement for futures:

On the expiry day of the futures contracts, after the close of trading hours, NSCCL marks all positions of a CM to the final settlement price and the resulting profit/loss is settled in cash. Final settlement price is the closing price of the relevant underlying index/security in the capital market segment on the last trading day of the contract.

Daily premium settlement for Options

Buyer of an option is obligated to pay the premium towards the options purchased by him. Similarly, the seller of an option is entitled to receive the premium for the option sold by him. The premium payable amount and the premium receivable amount are netted to compute the net premium payable or receivable amount for each client for each option contract.

Final exercise settlement for Options

Final exercise settlement is effected for all open long in-the-money strike price options existing at the close of trading hours, on the expiration day of an option contract. All such long positions are exercised and automatically assigned to short positions in option contracts with the same series, on a random basis. The investor who has long in-the-money options on the expiry date will receive the exercise settlement value per unit of the option from the investor who is short on the option.

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