Framework for net settlement of funds for transactions done by Foreign Portfolio Investors (FPIs) in cash market

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....s and Clearing Corporations dated December 30, 2024 inter-alia stipulates that no institutional investor shall be allowed to do day trading, i.e., square off their transactions intra-day. Thus, all transactions carried out by FPIs are required to be grossed at custodians' level and obligations are fulfilled by FPIs on a gross basis. The custodians, however, settle their deliveries on a net basis with the Clearing Corporations (CCs). 2. Representations were received from market participants highlighting that the gross settlement of transactions results in additional liquidity requirements, increased funding costs due to forex slippage and operational inefficiency for FPIs, particularly during days of index rebalancing. 3. Accordingly, ....

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....stodian. Also, Securities Transaction Tax (STT) and stamp duty shall continue to be charged on delivery basis. 6. Accordingly, the provisions stated at Para 4 of Annexure 3 of Chapter 1 (Trading) of SEBI's Master Circular for Stock Exchanges and Clearing Corporations dated December 30, 2024 shall stand modified to the extent specified herein. 7. The implementation standards shall be formulated by the Custodians and Designated Depository Participants Standards Setting Forum (CDSSF), after consulting the relevant stakeholders. 8. Custodians, FPIs and all relevant stakeholders are advised to make necessary changes in their systems to effect the changes specified above. 9. The provisions of this circular shall be implemented on or b....

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....e custodian. b) The custodian, however, settles its obligations on a net basis with the Clearing Corporation (CC). c) Accordingly, in the example given above, the pay-in and pay-out obligations of FPI towards the custodian and of custodian towards CC are given below: i. Obligation of FPI towards custodian   Pay-in Pay-out Funds 2000 4000 Securities Stock B: 20 Stock C: 20 Stock A: 10 Stock B: 10 ii. Obligation of custodian towards CC   Pay-in Pay-out Funds 0 2000 Securities Stock B: 10 Stock C: 20 Stock A: 10 iii. Pictorial depiction of the obligations of FPI, custodian and CC is given below: 2.2. New Mechanism (Netting o....