Towards greater transparency in pay-in and pay-out

proind · Newbie Joined: Feb 02, 2010 Posts: 1

While effect from 22 December 1997, the bank accounts of brokers maintained with the Bank of India, Bombay Stock Exchange (BSE) branch, the only clearing bank at that time, were directly debited through computerized posting on the pay-in day for their settlement dues. The list of clearing banks has since been expanded to include Housing Development Finance Corporation (HDFC) Bank Ltd, Global Trust Bank Ltd, and Standard Chartered Bank.

The securities, as per delivery orders issued by the BSE, are to be delivered to the clearinghouse on the day designated for pay-in, i.e., on Wednesday and Thursday as per prescribed time slots up to 1.00 PM. No late delivery of shares is permitted. Brokers have to deliver the securities in special closed pouches issued by the BSE along with the relevant details (distinctive numbers, scrip code, quantity, receiving broker name etc) on a floppy.

The data submitted by the brokers on floppies is matched against the master file data on the clearinghouse computer systems. If there are no discrepancies, then a scroll number is generated and a scroll slip is issued. The brokers can then submit the securities at the receiving counter. The clearinghouse personnel arrange and tally the securities received against the receiving broker-wise report generated on the pay-in day. Once this reconciliation is complete, the bank accounts of brokers having pay-in positions are debited on Thursday. This procedure is called pay-in.

The receiving brokers collect the securities on a Friday and the accounts of the brokers having payout are credited on Saturday. This is referred to as payout. Such a stringent trading process was initiated to ensure transparency and also to help the common man to be in touch with the various developments in the financial market. When commodity trades became popular, the same approach has been initiated by the regulatory authorities, but with certain modifications.