Modification in the existing internal close out policy of physical delivery trades- ICICI Bank PCM services

Physical settlements happens once in a month based on the derivative positions getting converted into delivery. There is a possibility of internal delivery shortages at clearing member and trading member level. This is due to the current regulatory practice of netting the delivery obligations at member level. If delivery of the security to the buyer is not possible such shortages are closed out monetarily. As per Exchange physical delivery policy Close out shall be at the closeout price of the security as determined in Capital Market Segment. In this respect, please find below modified close out procedure of physical settlement shortages for internal shortages.

Delivery Shortage:

Delivery shortages arises in two types.

1. Deliverable to\Receivable from exchange.

2. Receivable from one client and deliverable to the other client of the clearing member. Internal shortages arise when the client who sold the shares fail to transfer the securities to the bank (clearing member) who in turn should deliver the shares to buying client.

Proposed policy on Internal Shortages Close out:

So as per policy close out price of a symbol would be determined as below.

Closing out in the case of failure to give delivery for Normal Market

• Close out will be at the highest price prevailing in the NSE from the day of trading till the auction day or 20% above the official closing price on the auction day, whichever is higher.

Compulsory Close-out of securities under Corporate Action

• For scripts under any corporate action compulsory closed out will be applicable at higher of 10% above the official closing price on the auction day or the highest traded price from first trading day of the settlement till the auction day.

Close out price would be multiplied with the shortage quantity to calculate the internal shortage obligations. Same amount would be collected from the short delivering client and it would be transferred to the buyer of that security.

Please note this policy will be applicable from Jan 2023 Expiry onwards.