Description

Consolidated master circular covering all compliance requirements for Clearing Members of NSE Clearing Limited, including client registration, margin collection, dealings with clients and intermediaries, books of accounts, compliance submissions, and enforcement actions.

Summary

NSE Clearing Limited has issued a consolidated master circular (CMPL74024) for Clearing Members (CMs), consolidating all regulatory requirements and guidelines into a single reference document spanning 80 pages. The circular covers seven major areas: client registration, margin collection, dealings with clients and intermediaries, books of accounts, compliance submissions, and enforcement actions.

Key Points

  • CM-CP (Clearing Member – Custodial Participant) agreements must follow the format prescribed by NSE Clearing Limited; the current format is referenced via NCL Circular No. NCL/CMPL/67806 dated April 30, 2025
  • CM-TM (Clearing Member – Trading Member) agreements must also conform to NSE Clearing Limited prescribed formats, available on the NSE website
  • Clearing Members are mandatorily required to collect VaR margins and Extreme Loss Margin from Trading Members and Custodial Participants in the Capital Market segment
  • Peak Margin collection and daily reporting of short-collection or non-collection of client margin are required
  • Acceptance of cash by Clearing Members has been discontinued
  • Clearing Members must segregate and monitor collateral at the client level and follow guidelines for collateral allocation
  • Upstreaming of clients’ funds to Clearing Corporations by Stock Brokers and Clearing Members is mandated
  • Half-yearly Internal Audit Reports must be submitted by Clearing Members; System Audit Reports are required from Professional Clearing Members (PCMs)
  • Demat accounts maintained by members must follow naming/tagging guidelines
  • Outsourcing of activities by intermediaries is subject to specific guidelines

Regulatory Changes

  • Discontinuation of reporting of Trading Member-wise details of cash and cash equivalent collateral
  • Discontinuation of reporting of Bank Account Balances
  • Modifications in STP messaging formats due to implementation of Stamp Duty
  • Requirement for undertaking/authorisation allowing Stock Exchanges and NSE Clearing to access bank account information directly from Banks
  • Standard Operating Procedure (SOP) for Clearing Members leading to default now requires a specific undertaking submission

Compliance Requirements

  • Client Registration: Execute CM-CP and CM-TM agreements in prescribed formats; custodial participants must register through their clearing members
  • Margin Collection: Mandatorily collect VaR and Extreme Loss Margins; submit daily margin statements; comply with peak margin collection and reporting norms; report short-collection or non-collection of client margins daily
  • Client Dealings: Handle client funds and securities per prescribed guidelines; discontinue acceptance of cash; follow proper naming/tagging of demat accounts; maintain separate client and settlement bank accounts
  • Intermediary Dealings: Ensure relevant personnel hold NISM Series VII (Securities Operations and Risk Management) and NISM Series IIIA (Securities Intermediaries Compliance) certifications; comply with outsourcing guidelines
  • Books of Accounts: Maintain books of accounts, Register of Securities, Holding Statements, Bank Books, and Client Ledgers as prescribed; preserve records per stipulated timelines
  • Compliance Submissions: Segregate and monitor collateral at client level; allocate collateral per guidelines; provide effective oversight over Trading Members cleared by CMs; submit undertakings for bank account access; submit half-yearly Internal Audit Reports; PCMs must submit System Audit Reports; comply with bank guarantee restrictions on client funds; ensure proper upstreaming of client funds to Clearing Corporations; appoint and comply with Compliance Officer guidelines

Important Dates

  • CM-CP Agreement format last updated via NCL Circular No. NCL/CMPL/67806 dated April 30, 2025
  • All other deadlines and effective dates are governed by the individual circulars referenced within this master circular

Impact Assessment

This master circular has broad and high operational impact on all Clearing Members of NSE Clearing Limited. It serves as the single authoritative reference document for CM compliance obligations across Capital Market and Derivatives segments. Key operational areas affected include margin infrastructure (peak margin reporting, daily short-collection reporting), client fund management (segregation, upstreaming, no-cash policy), audit obligations (internal and system audits), and enforcement exposure. Professional Clearing Members face additional system audit requirements. The consolidation of all prior circulars into one document simplifies reference but demands comprehensive review by compliance and operations teams at every Clearing Member firm.

Impact Justification

Master consolidated circular affecting all Clearing Members of NSE Clearing Limited across all segments; covers mandatory margin collection, client fund handling, and enforcement actions with broad operational impact.