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Share Delivery-T+2 Clearing & Settlement Process @ BSE & NSE | Stock Market Basics for Beginners|#13 - YouTube
Channel: Asset Yogi
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Namashkar, my name is Mukul and welcome to another important video of the master investor series
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Have you ever thought why the delivery of a share takes place after 2 days
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I am not talking about intraday trading where you buy/sell any share on the same day
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But if you want to buy any share for the long term and you pay for it, you get the delivery after 2 days
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Why is this process 2 days long?
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People have many confusions regarding this
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So in this video, we'll understand the clearing and settlement cycle of a share
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So that you all don't have any further confusion. So keep watching
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Friends if you want to learn stock investing then you can follow our Master Investor Series which is absolutely free
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You'll get the link to the playlist in the description
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Besides this, we get a common query
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that if we want to trade/invest in shares, then where to open a D-mat and trading account
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So I would recommend opening your account with a discount broker where brokerage charges are very less
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and delivery charges are 0.
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Latest offers, recommendations and links for the D-mat account is given in the description
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Besides this, if you have any stock market related queries or if you need initial hand holding
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Then you can contact us on our Whatsapp number 9292924848
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With that, you can also contact us on our email id that is given on your screen
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There are some of you who want to invest but don't have time for research
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They can also contact on our Whatsapp number
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Before discussing the clearing and settlement process,
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I would request you to watch 'stock market participants' video if you haven't watched it yet
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So that all the roles and responsibilities will be clear to you in detail
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But still, let's summarise in this video
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As we saw that trading of shares take place in the stock exchange
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Buyer and seller cannot trade directly in the stock exchange that's why they need a broker
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So this is the buyer's broker and this is the seller's broker
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We also saw that there are 2 important sister concerns of stock exchange
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One is the depository and another one is the clearing house
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So what is the depository?
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The depository for NSE is NSDL and the depository for BSE is CDSL
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Your shares are stored in the depository and the clearing house do money transactions
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So the clearing house for NSE is NSE Clearing and for BSE, it is ICCL
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So NSE will do all the money settlements with NSE Clearing
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And we'll see how this happens
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These depositories do not interact directly with buyers/sellers
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Depository says that they cannot handle so many transactions directly so they say that they want a Depository Participant
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Who will handle all the transactions and similarly clearing house also says that they also want a clearing member
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And the intermediary for the stock exchange is a trading member
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And the Broker is the one who does the work of intermediary
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So one is the broker of the seller and one of the buyer
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Now they can be either the same or different
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For example, let's say the broker for the buyer is Zerodha and for the seller, it's Upstox
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This was just for example
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And now let's understand how will this whole transaction take place
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Before that, we're left with the role of the clearing bank
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A clearing member opens an account in a clearing bank
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And we'll see what is its role
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For understanding the whole transaction, I realigned the diagram
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So these are the clearing banks
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This one is of the buyer's broker and this one is of the seller's broker
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Similarly, every broker need to open a dedicated pool account
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That means the depository participant of the seller's side have to open a dedicated pool account with the depository
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Similarly, the buyer's broker will also have to open a dedicated pool account with the depository
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For example, let's say this transaction is happening on the NSE
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So the depository will be NSDL and the clearing house will be NSE Clearing
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Now let's understand the transaction
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The buyer will have a D-mat and a trading account and similarly the seller will also have
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So how will the transaction occur?
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Let's say the transaction is happening on the T day which is the trading day
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So let's say this transaction took place on Tuesday
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So T+1 is Wednesday and T+2 will be Thursday
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If the transaction took place on Tuesday, its delivery will take place on Thursday
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Now you will ask that if there's a holiday on Wednesday, then when the delivery will happen
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Then instead of Thursday, it will take place on Friday
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That means the working day will shift because of the holiday
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So let's now understand how the transaction will take place
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Let's say, buyer placed an order on Tuesday
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to buy 20 HDFC shares at Rs. 1000
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So he placed this order with his broker who is also a trading member
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On the same day, the buyer's broker will place an order for 20 shares at Rs. 1000
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On the other hand, let's say the seller placed a sell order of 20 HDFC shares at Rs. 1000 and
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And the same order came to NSE
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There will be many orders like these with NSE
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Maybe someone is ready to sell at Rs. 900 but that order wouldn't match here
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If someone wants to sell at Rs.1100, then that also doesn't match here
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If seller A is ready to sell 10 shares at Rs.1000 and seller B is also ready to sell
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So this matching of price and quantity takes place at the stock exchange
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Which takes place through an automatic order matching system
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The buyer placed a buy order of 20 shares at Rs. 1000
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And the order matched with a sell order placed by the seller
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And NSE will send this information on the same day to its depository and clearing house
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That means now this information is with NSDL and with NSE Clearing house.
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That this buyer wants to buy 20 shares at Rs.1000 and this seller wants to sell
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and the trade between these two is to be executed
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So on Tuesday, Rs. 20,000 will get debited from the buyer's account and it will reach the broker, i.e Zerodha
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Now because clearing house got this information on Tuesday
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On the next day, i.e on T+1 day, clearing house will send the information of obligations
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To both the clearing members
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It will ask the buyer's clearing member to transfer Rs. 20,000 to the clearing bank account
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And will give receiving information to the seller's clearing member
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So on T+1 day, the buyer's broker will deposit Rs. 20,000 in the clearing bank
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And on the next day, i.e on T+2 day, this amount will be transferred to the seller's clearing bank
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Now the transaction after this has become very simple
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Clearing member's clearing bank has got the money
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And on the same day, they will transfer it to the seller's trading account
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That means on T+2 day, i.e Thursday in our example
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So on Thursday, Rs.20,000 are transferred
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So we saw the cash cycle and who handled the cash?
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Clearing house handled it
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However, they are not directly involved, they just noted the transactions
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And sharing information with the clearing members
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So we understood the cash transaction, now let's understand the shares transaction
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Let's say there were different types of shares in the D-mat account of the seller
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Let's say he had 20 HDFC shares, some shares of TATA MOTORS, RELIANCE
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And he was selling 20 HDFC shares
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So on T day, he sold 20 shares and those 20 shares went to depository participant
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Who is a depository participant?
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It is the broker of the seller, i.e Upstox according to our example
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And we're assuming that the buyer's broker is Zerodha
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And let me give you an example of the clearing bank
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Let's say the clearing bank of the buyer's broker is AXIS and of the seller's broker is ICICI
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These clearing banks can be either the same or different as well and similar case with the brokers
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I am taking different to bring clarity in our example
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So on T day, these 20 shares reached depository participant
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And you know that depository got this information from NSE on the same day
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So depository will tell about the obligations to both
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It will ask the seller to transfer 20 shares in the dedicated pool account
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And it will inform the buyer's broker that you will receive 20 shares soon
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So seller's broker got this information that it has to transfer 20 shares
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So it will transfer 20 shares on the same day to the dedicated pool account which it opened with the depository, i.e NSDL
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So according to our example, 20 HDFC shares are now in the dedicated pool account
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On the next day, i.e on T+2 day, without any holidays in between
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It will transfer 20 shares in the buyer's dedicated pool account
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On the same day, the depository participant got the shares, hence buyer's broker got the shares
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So on the same day, 20 shares will be transferred to the buyer's D-mat account
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So 20 HDFC shares reached here
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In this way, the whole cycle works
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On T day, the trade is executed and on T+2 day, the delivery of shares take place
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I hope that after watching this video, you understood the whole Clearing and Settlement cycle
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And there's no confusion remaining
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So if you liked this video, then do press the like button and share it
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Till then keep learning, keep earning, and stay happy as always.
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