• How should I give my purchase/sale instructions to my trading member/sub-broker?

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.

• What are the documents I should receive from my NSE trading member/registered sub-broker pertaining to my trade and when should I get them?
• Order confirmation slip - After the order has been placed.
• Trade confirmation slip - After the trade has been executed.
• Contract note - Within 24 hours of the trade being executed.
• Purchase/sale note where deal is routed through a registered sub-broker of a NSE trading member - Within 24 hours of the trade being executed

You should always insist on getting your contract notes or purchase/sale note from your trading member or sub-broker respectively.

• What if the details contained in the contract/purchase/sale notes are incorrect or the notes include some transactions not pertaining to my orders/trades?

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.

• What is a contract note and why is it essential?

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.

• Why should I insist on getting contract/purchase/sale notes for trades executed?

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.

• Will I get a contract note even if I have dealt with a 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.

• What are the points to be checked by an investor to check the validity of a contract note?

To ensure that the contract note issued to you by the trading member is a valid one, you must verify the following details:

1. The contract note should be in prescribed format .
2. Name and address of the trading member.
3. The SEBI registration number of the trading member Details of trade viz. Order number, trade number, trade time, security name, quantity, rate, brokerage, settlement number, details of other levies.
4. The trade price should be shown separately from the brokerage charged.
5. Signature of authorised signatory and the arbitration clause stating that the trade is subject to the jurisdiction of Mumbai must be present on the face of the contract note.

• What are the points to be checked by an investor to check the validity of a purchase/sale note?

1. The purchase/sale note should be in prescribed format
2. Name, address and SEBI registration number of the registered sub-broker
Name, address and SEBI registration number of the affiliated trading member
3. Details of trade viz. order number, trade number, trade time, security name, quantity, rate, brokerage, settlement number, details of other levies.
4. The trade price should be shown separately from the brokerage charged.
5. Signature of authorised signatory and the arbitration clause stating that the trade is subject to the jurisdiction of Mumbai must be present on the face of the contract note.

• What is the maximum brokerage that a NSE trading member/registered sub-broker can charge?

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).

• What are the additional charges other than brokerage that can be levied on the investor?

The trading member can charge:

1. Service tax @ 5% of the brokerage
2. Transaction charges levied by NSE
3. Penalties arising on behalf of client (investor) The brokerage and service tax is indicated separately in the contract note.

Charges on Margin Deficit in Cash or Cash Equivalent- F&O

• What is an Account Period Settlement?

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.

• What is an Account Period Settlement?

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.

• How do I pay-in demat shares towards my sale obligation?

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.

• How do I receive demat shares in my beneficiary account towards my purchase transaction?

You should 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 Clearing Corporation.

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.

• What is the Settlement Guarantee Fund?

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.

• Are investors affected, in case a counter trading member fails to pay-in funds as per his settlement obligation?

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).

• What is an Auction?

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.

• If I have shares to deliver, can I take the benefit of the auction mechanism?

Yes, you can ask your trading member to sell your securities in the Auction. However you should ensure that:

1. Shares are readily available for delivery (pay-in day of securities for auction is held within 1 or 2 days of auction) and
2. Shares delivered are good delivery (no opportunity provided for rectification of bad delivery)

Securities 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.

• What happens if the shares are not bought in the auction?

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.

• What are Good and Bad Deliveries?

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 etc.

• What is the recourse available to me if I receive a bad delivery?

All bad deliveries have to be reported to the Clearing House by the buying trading member within 48 hours of pay-out day.

• Is it obligatory on the part of the investor to check that the deliveries given to him is good?

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.

• What are company objections?

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.

• What is a Stop Transfer case?

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.

• What should I do with shares returned by the company as company objections? What is the time frame for reporting company objections?

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.

• After submitting my shares under objection to the trading member, how do I get my rectified/replaced shares?

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.

• What about the corporate benefits (dividend, bonus, rights etc) lost by me due to shares returned as company objection?

` 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.