To buy or sell securities you could approach either:
The Exchange can ensure settlement and handle disputes/claims arising out of only
those trades which are executed on NSE through registered trading members /registered
sub-brokers. Hence for all trades done on NSE through an entity who is not registered,
the investor has no recourse through the Exchange in case of non settlement or a
claim/dispute arising out of the same.
You may ask the person to furnish documents such as SEBI registration certificate,
registration with NSE, etc to verify the antecedents of the person. You can also
approach the Exchange to countercheck whether the person holds a valid registration.
All investors should register themselves with registered trading members/sub-brokers
The Member-Constituent Agreement contains the terms and conditions including order/trade
confirmation, brokerage charged by a trading member, delivery of securities and
funds and therefore helps reduce the chances of disputes in respect of the same.
This Agreement is mandatory for all persons registering as a new client of a NSE
trading member/SEBI registered sub-broker
You should read the various terms and conditions carefully and understand their
implications before entering into this agreement with your trading member.
A trading member/client relationship is one of trust. However, it is very important
that all your order instructions are given in writing and are duly acknowledged
by the trading member. The order instructions should clearly indicate the scrip
name, whether order is for buy or sell, the quantity for each of the scrips, rate
specifications if any, and other relevant instructions. This reduces chances of
miscommunication between you and your trading member/sub-broker at the time of placing
deals on your behalf.
The system arranges all orders in the priority of price and within price by time.
You have, let us say,placed a buy order for 100 shares of company A at Rs. 285 and
another investor has placed a buy order at Rs.290. So,anyone who places a sell order
in company A will be first matched with the buy order of second investor as he has
given a better price. This is price priority. Let us say both of you have quoted
Rs. 285 as the price at which you want to buy shares of company A, then sell order
which comes into the system at this price will be matched against the order which
was placed first.
The NSE trading system matches orders in such a way that the order gets executed
at a price which is either equal to or better than the specified price but never
worse than it. Therefore, if you have given an order for selling 100 shares at the
rate of Rs.50, your order will be traded in the system in such a way that you will
get a sale price of Rs.50 or more but never less. Similarly, if you have given an
order for buying 100 shares at the rate of Rs.50, your order will be traded in the
system in such a way that you will get a buy price of Rs.50 or less but never more.
The NSE trading system (NEAT) generates and maintains an audit trail of the orders
entered on the system by assigning a unique order number to all the orders placed
on the NEAT system. You should therefore ask your trading member to give you the
unique order number that the system has assigned to your order.
Further, as soon as your order is executed, a trade confirmation slip is generated
which displays the trade number, trade time,quantity and price at which your trade
took place and the corresponding order number. Trading members are obligated to
give their clients a trade confirmation slip the moment a trade takes place. By
looking at the trade slip, you can actually verify the rate at which your order
At the end of the day, the trading member should give you a contract note.
You can verify this by checking that the price given to you pertains to the unique
order number provided to you by the trading member. The Exchange maintains details
of the order/trade number and other details pertaining to the transaction for a
period of eight years and the investor can countercheck these details with the Exchange.
You should always insist on getting your contract notes or purchase/sale note from
your trading member or sub-broker respectively.
You should countercheck the details contained in the contract/purchase/sale notes
with those on the order and trade confirmation slip. Check whether the order number,
trade number and other details on the trade confirmation slip match with those on
the contract/purchase/sale notes.
In case of any discrepancy, you should bring the same to the notice of the trading
member/sub-broker immediately by way of written communication duly acknowledged
by the trading member/sub-broker, clearly mentioning the deals (in dispute) which
do not pertain to you.
Contract note is a confirmation of trade(s) done on a particular day for and on
behalf of a client. A contract note issued in the format and manner prescribed by
NSE establishes a legally enforceable relationship between the trading member and
client in respect of settlement of trades executed on the Exchange as stated in
the contract note. Contract notes are made in duplicate, and the member and client
both keep one copy each.
The said contract notes should be signed by a trading member or by an authorised
signatory of the trading member.
After verifying the details contained therein, the second copy of contract note
should be returned to the trading member duly acknowledged by you.
These documents are very important to enforce the deals transacted through the trading
member/sub-broker. In case of disputes/claims/differences, these documents would
help you to prove that the transactions have been executed on the Exchange through
NSE TM/registered sub-broker.
These documents are a prerequisite for filing a complaint or arbitration proceeding
against TM/registered sub-broker.
In case you have dealt through a registered sub-broker, the sub-broker is required
to issue purchase/sale notes to you. However, the trading member would issue to
your sub-broker back-to-back contract notes giving details of all the transactions
done by the sub-broker through the trading member's terminal.The said notes should
be signed by an authorised signatory of the registered sub-broker.
After verifying the details contained therein, the second copy of purchase /sale
notes should be returned to the sub-broker duly acknowledged by you.
To ensure that the contract note issued to you by the trading member is a valid
one, you must verify the following details:
As stipulated by SEBI, the maximum brokerage that can be charged is 2.5% of the
trade value. This maximum brokerage is inclusive of the brokerage charged by the
sub-broker (sub-brokerage cannot exceed 1.5% of the trade value).
The trading member can charge:
An account period settlement is a settlement where the trades pertaining to a period
stretching over more than one day are settled. For example, trades for the period
Monday to Friday. The obligations for the account period are settled on a net basis.
Account period settlement has been discontinued since January 1, 2002, pursuant
to SEBI directives.
In a Rolling Settlement trades executed during the day are settled based on the
net obligations for the day.
In NSE, the trades pertaining to the rolling settlement are settled on a T+2 day
basis where T stands for the trade day. Hence trades executed on a Monday are typically
settled on the following Wednesday (considering 2 working days from the trade day).
The funds and securities pay-in and pay-out are carried out on T+2 day.
You have to deliver the securities to the trading member immediately upon getting
the contract note for sale but in any case, before the prescribed securities pay-in
If you have bought securities, you have to pay the amount to the trading member
in such a manner that the amount paid is realised before the funds pay-in day.
The securities and the funds are paid out to the trading member on the pay-out day.
The NSE regulations stipulate that the trading member should pay the money or securities
to the investor within 48 hours of the pay-out.
The pay-in and pay-out days for funds and securities are prescribed as per the Settlement
Cycle. A typical Settlement Cycle of Normal Settlement is given below:
Note: The above is a typical settlement cycle for normal (regular) market segment.
The days prescribed for the above activities may change in case of factors like
holidays, bank closing etc. You may refer to scheduled dates of pay-in/pay-out notified
by the Exchange for each settlement from time-to-time.
You should instruct your
Depository Participant (DP) to give 'Delivery Out' instructions to transfer the
shares from your beneficiary account to the Pool Account of your trading member
through whom you have sold the shares. The details of the Pool A/C(CM-BP-ID) of
your trading member to which the shares are to be transferred, scrip quantity etc.
should be mentioned in the Delivery Out instructions given by you to your DP.The
instructions should be given well before the prescribed securities pay-in day. SEBI
has advised that the Delivery Out instructions should be given atleast 24 hours
prior to the cut-off time for the prescribed securities pay-in to avoid any rejection
of instructions due to date entry errors, network problems etc.
give Standing Instructions for 'Delivery-In' to your DP for accepting shares in
your beneficiary account. You should give the details of your beneficiary account
and the DP-ID of your DP to your trading member. The trading member will transfer
the shares directly to your beneficiary account on receipt of the same from the
Pursuant to SEBI directive (vide its circular SMDRP/Policy/Cir-05/2001
dated February 1, 2001) NSCCL has introduced a settlement system for direct delivery
of securities to the investors accounts with effect from April 2, 2001.
The Clearing Corporation has set up the Settlement
Guarantee Fund (SGF) through contributions of its trading members. The SGF is intended
primarily to guarantee completion of settlement up to the normal pay-out for trades
executed in the regular market and will not act as guarantee for company objection
cases i.e. replacement of bad paper or payment of its equivalent financial value.
The SGF therefore ensures that the settlement is not held up on account of failure
of trading members to meet their obligations and all market participants (trading
members, custodians, investors etc.) who have completed their part of the obligations
are not affected in any manner whatsoever.
No, the investor
is not affected in case the counter trading member fails to meet his obligation
since National Securities Clearing Corporation Limited (NSCCL) guarantees the net
settlement obligations. The Clearing Corporation guarantees completion of settlement
through the Settlement Guarantee Fund (i.e. NSCCL steps in on behalf of the trading
member who failed to bring in funds).
The securities are put up for auction by the Exchange on account
of non-delivery of securities by the selling trading member to ensure that the buying
trading member receives the securities due to him. The non-delivery by the trading
member could arise on account of short delivery, bad deliveries not rectified and
company objections not rectified by them.
The Exchange purchases the requisite quantity
in the Auction Market and gives them to the buying trading member.
Yes, you can ask your
trading member to sell your securities in the Auction. However you should ensure
not delivered on auction pay-in day or bad delivery of securities delivered in auction
are directly squared off at a price specified by the Exchange/Clearing Corporation.
If the shares could not
be bought in the auction i.e. if shares are not offered for sale in the auction,
the transactions are squared up as per SEBI guidelines. As per the guidelines in
force, the transaction is squared up at the highest price on the NSE from the relevant
trading period till the close-out day or at 20% above the last available trading
price on the NSE, whichever is higher.
SEBI has formulated uniform guidelines for good
and bad delivery of documents. An exhaustive list of instances of good or bad delivery
of documents - transfer deed and share certificate is included in the said guidelines.
For example, bad delivery may pertain to transfer deed being outdated (date not
valid), torn, mutilated, overwritten, defaced; or spelling mistakes in the name
of company/transferor or mistakes in writing the folio/certificate/distinctive number
All bad deliveries
have to be reported to the Clearing House by the buying trading member within 48
hours of pay-out day.
Investor should ensure that deliveries given
and received by them are good. This would reduce complications and additional paper
work for rectifying the same at a future date.
After buying the shares, the investor sends the certificate
along with the transfer deed to the company for transfer and registration in their
name. In certain cases,the registration is rejected by the company for reasons such
as signature difference or fake/forged/stolen shares or court injunction preventing
transfer. In such cases the company may return the share certificate and transfer
deed along with a letter termed as Objection Memo. All such cases are identified
as Company Objections.
Stop transfer is the process
whereby the transfer of shares is stopped by the company under grounds provided
for in the Companies Act 1956. The stop transfer is generally affected by the company
on the strength of a copy of FIR or court order when some securities are reported
missing/lost/stolen by the holder of the securities.
You should submit the documents (company objection memo, transfer
deed, share certificate and other relevant documents) received from the company
to your trading member immediately. The shares returned by the company should be
reported as Company Objection to the Clearing House within 12 months from the date
of issue of the objection memo. Company objection cases can be reported by the trading
members to the Clearing House typically on Tuesday and Wednesday every week.
The trading member will report these shares to the Clearing House who in
turn will forward the documents to the trading member who first sold the shares
on the Exchange (introducing member of NSE) for rectification/replacement. The introducing
members are required to rectify/replace the shares reported under objection within
21 days failing which the shares are put up for auction subject to Bye-laws, Rules
and Regulations of the Exchange.
` The introducing
member is also required to pay to the buyer, the equivalent value of corporate benefits
that may have been announced by the company after he delivered the shares to the
Exchange for the first time till the date he delivers the rectified/replaced shares.
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Download Client Registration Documents (Rights & Obligations, Risk Disclosure Document,
Do's & Don't's) in Vernacular Language :
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