What is the new quarterly Settlement or Running Account Settlement process?

To safeguard the interest of the investor/trader, SEBI mandated all stockbrokers to reverse any funds that are lying in the trading account back to the Bank account of the client.
As per the SEBI Circular, effective Oct 1, 2022, the settlement of running account of funds of the client shall be done by the trading member ‘after considering the end of the day (EOD) obligation of funds as on the date of settlement across all the exchanges on the first Friday of the quarter (i.e., Apr-Jun, Jul-Sep, Oct-Dec, Jan’Mar) for all the clients.

Please refer to the table below to understand quarterly settlement dates.

• 1st Friday of July
• 1st Friday of October
• 1st Friday of January
• 1st Friday of April

What is the value of funds that a trading member can retain while doing the settlement?

In case of a client has any outstanding trade position on the first Friday of the Month / Quarter on which settlement of running account of funds is scheduled, a Trading member may retain funds calculated in the manner specified below:

i. Entire pay-in obligation of funds outstanding at the end of the day on the date of settlement, across all segments.

ii. Member may retain 50% of end-of-the-day (EOD) margin requirement as cash margin, excluding the margin on consolidated crystallized obligation/ MTM.

iii. Apart from the 50% cash margin mentioned in point ii above, a member may also retain 225% of EOD margin (which includes an additional 125% margin) reduced by 50% cash margin and the value of securities (after applying appropriate haircut) accepted as collateral from the clients by way of ‘margin pledge’ created in the Depository system for the purpose of margin and value of commodities (after applying appropriate haircut).

For example – Say, you have Rs. 2,25,000 in your account and have taken four lots of security X with a required margin of Rs. 25,000 per lot. So, Rs. 1,00,000 would be blocked from your account, leaving a balance of Rs. 1,25,000. As per the rules, the broker has to maintain a 225% balance for the open position held by you. In this example, you need to maintain the total margin of Rs. 2,25,000 (1,00,000*225%). As the fund available in your account is only Rs. 2,25,000, your account will be marked as retained, and the broker will not refund any amount to your account.

Kindly note –

-Kindly note that, if the first Friday of the quarter is a trading holiday, then ‘such settlement shall happen on the previous trading day’.

-The client can re-transfer the funds on the same day after getting the payout.

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