How Quarterly Settlements work in Indian stock markets

Quarterly settlements in Indian stock markets is an initiative by SEBI to ensure that brokers do not misuse funds or securities kept with them. SEBI introduced this policy of quarterly settlements on 3rd December 2009. This policy insists brokerage firms like us to consider the balances of funds & securities of clients across all segments of the Exchange while settling the client accounts. These balances (both funds & securities) are transferred to client’s bank account & demat account respectively, once in 90 days.

Clients can opt from any of the below mentioned quarterly settlements:

1. Bill to bill settlement: The settlements of funds and/or securities shall be done within 1 working day of payout.

2. Running account settlement: Clients whose funds and securities are maintained on a running account basis have to be settled by members on a monthly/quarterly basis as per the client preference. However, quarterly settlement timeframe is preferred by traders and brokers alike as it reduces the hassles of unnecessary fund transfers and hinders trading activity from time to time.

Time period for settlement of client funds and securities:

If in case a client wishes to maintain a running account as mentioned above with Fyers, the client has to authorize us in writing to retain its funds & securities. Authorization which is given by the client should also contain:
1. Preference of the client as to whether the settlement of funds and securities should be done on a monthly or quarterly basis.
2. A clause stating that the client may revoke the authorization at any time (i.e. without notice)

Accordingly, the quarterly settlement of funds and securities shall be done by us at least once in a calendar quarter or month, depending on your preference. If you feel that it is unnecessary you can buy liquid bees and sell it on the next trading day as soon as the market opens. Liquid Bees is a debt ETF which is used to park your funds in debt for short periods of time.

Quarterly Settlement at FYERS:

1. Securities – For depository services, we are tied up with IL&FS. They are responsible for quarterly settlement of securities. At Fyers, we will send the demat holding statement to clients upon request for whatsoever reason the client may require it.

2. Funds – Excess unutilized funds of the quarter are transferred back to the client’s bank account through NEFT/RTGS depending on the amount.

Transaction timings from Monday to Saturday are 8:00 AM to – 7:00 AM for NEFT & up-to 5:00 PM for RTGS fund transfers. Back-end operations are done around 07:00 PM on every trading day, which actually helps to find out the client balances which are to be transferred. NEFT on the last day will not be processed as the time lapses on that particular day, so transfers get processed only on next working day. As mentioned above, banking transactions are not processed on second and fourth Saturdays.

What FYERS can retain during settlements:
If a client has any obligations pending, we may retain the requisite securities/funds towards such obligations and may also retain the funds expected to be required to meet margin obligations for next 5 trading days. The retention depends on the obligations.
1. To the extent of value of funds/securities on the day of such settlement in capital markets
2. Additional margin (maximum up to 75%) can be retained in derivatives segment apart from margin liability as on the date of settlement

How to deal with inconvenience caused by Quarterly settlements:

• Ideally, you should utilize the capital in your trading account to avoid unnecessary fund transfers to and from from your account.
• In case the amount lying in your trading account is idle, you can buy Liquid Bees once in a month/quarter and sell it the next day to avoid payout of funds.
• If you have utilized the funds to trade or invest, you need not worry as the funds will not be paid back to your bank account. Please note that the regulation is to make sure that the client funds are always at the behest of the clients and not the broker.

Important Notes:
1. SEBI have given relaxation on accounts whose balance is less than 10,000. This means that if a client maintains less than 10,000 in his trading account, his/her account will remain the same unsettled and you will not have to unnecessarily go through the quarterly settlement process.
2. In case the day of quarterly settlement fall on a trading holiday, settlements are done on the previous trading day.

If you have any doubts or need further clarifications, you can interact with us in the comments section below.

Tejas Khoday

Tejas Khoday

Tejas is the Co-Founder & CEO @ www.fyers.in, the youngest team to get NSE’s broker license. FYERS was started as a mission to enhance the terrain for traders and investors in India. He previously worked at Zerodha, Futures First & has been a professional trader for several years.

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Showing 9 comments
  • Chethan
    Reply

    Can i know on which month and on which date the quarterly settlements happens?

  • Vidya
    Reply

    If i have 1lack in my trading account and quarterly settlement will happen only for 90k or the whole amt will be credited into my bank a/c?

  • Jyothi
    Reply

    If i want to avoid quarterly settlements what i need to do?

  • Atul
    Reply

    Explained it with simply words
    Great

  • Jaggi
    Reply

    I wonder why sebi is doing all this complication. I always face this problem that broker will return the money even when I want to keep in my account. Good to know that we can park money in liquid bees to avoid quarterly settlement.

  • Tejas Khoday
    Reply

    There are no fixed dates to conduct quarterly settlements. It can be done within 3 months.

  • Tejas Khoday
    Reply

    You will need to invest the amount atleast once in 3 months. In case it is idle, you can also opt to park it in liquid bees overnight to avoid quarterly settlement.

  • Tejas Khoday
    Reply

    Only the unutilized amount of ₹10,000.

  • Tejas Khoday
    Reply

    Yes, it is a hassle but this rule was imposed by SEBI to ensure that clients money is safe. The way we follow compliance, the money will be safe anyways.. but we all got to follow the rules.

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