Quarterly settlement of funds & securities

December 18, 2016
Funds and Margins

Traders,

We keep getting queries on quarterly settlements, hence the detailed explanation below.

What is Quarterly Settlement of Funds & Securities?

Back in 2009, the market regulator, SEBI, introduced the policy of Quarterly Settlement of Funds & Securities. According to the policy, brokerage firms are required to transfer back all unutilized sums of money kept in the client’s trading account back to the client’s bank account at least once, in a period of 90 days. Similarly, if any client securities are held with the brokerage firm, such securities need to be transferred back to the client’s demat account, once in 90 days. Client securities (Stocks, MF, etc) could be lying with the broker either when they are pledged for trading in the F&O segment or when such securities aren’t fully paid for by the investor.

 

Which accounts need to be settled?

As explained above settlement is essentially the act of transferring unused funds lying in the client’s trading account back to the client’s bank account. To avoid operational inconvenience, SEBI has relaxed the rules for accounts with balances less than Rs.10,000 (Rs.50,000 for commodities), these accounts are deemed settled without funds having to be transferred back.

Additionally on the day the brokerage firm is settling funds, the brokerage is allowed to block upto 125% of any margin being used for F&O position held by the client to ensure that there is enough funds to manage any MTM loss, and only transfer back the rest of unutilized funds.

 

How does Settlement work at Zerodha?

Settlement of stocks

Unlike traditional brokers, at Zerodha we don’t hold back client stocks in our pool account. This is because currently we don’t offer margin trading facility and hence all the stocks are fully paid for. Whenever our clients buy stocks, they’re transferred to their respective demat accounts. (P.S: We’ll be starting margin trading facility in the future :)). Stocks that require settlement are those pledged by clients as margin for trading F&O.

If stocks are pledged but margin is not utilized, stocks are unpledged and transferred back to the client demat account once in a quarter. A new pledge request has to be initiated if the client wants to use them as collateral for trading F&O again.

Settlement of Funds

On the day of settlement, all excess unutilized funds in the last quarter (90 days) are transferred back to the client bank account through NEFT/RTGS. RBI accepts RTGS requests until 05:00 pm and NEFT requests till 07:00 pm. To determine the excess funds that need to be transferred, the daily trade process needs to be completed which happens around 07:00 pm on every trading day.

Since the cut off time for NEFT would have lapsed by the time trade process for the day completes, such transfers get processed only the next working day. While credit through RTGS (for funds > 2 lacs) is much faster, NEFT can sometimes take upto 8 working hours. The NEFT service also remains closed on every second and fourth Saturday owing to the banks being closed.

Operational inconvenience due to settlement

Once funds are received to the client’s bank account, the client will have to initiate a transfer back to the trading account in case he wishes to continue trading. One may have to incur costs for transferring funds back to the trading account in the form of bank transfer or payment gateway charges. More importantly a client also gets exposed to a situation where the money gets stuck in the entire to & fro process when a trading opportunity arises.

Similarly, when unutilized pledged securities are transferred back to the demat, there could be upto 2 days turnaround time before they get pledged back to obtain margins.

On several occasions in the past, we’ve received complaints from clients ruing the loss of trading opportunity because of this. However being a SEBI regulated intermediary, we’ve to abide by the rules and regulations set forth by the regulator.

 

Is there a way I can ensure that I don’t miss any opportunity?

Yes. If a client hasn’t utilized all funds for an overnight position in the trading account even for one day in a quarter, he could buy liquid bees or liquid mutual funds any one day in the quarter and sell them the next day morning as soon as market opens. With liquid mutual funds, this trade can be done is such a way that the funds get debited only after market closing and credited before next day opening. Liquid funds are fixed income instruments and have no brokerage (at Zerodha) or STT charges. This way a client can ensure that funds are never blocked when markets are open and also not have to bear any bank or gateway charges.

If the client doesn’t have the bandwidth to do this on their own, client can request us to track, remind, and place an order for this. To do this, visit q.zerodha.com/profile and set preference as ‘Buy overnight liquid fund’ as shown below.

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In case of pledged securities, the only way out of not having to go through the entire pledge/unpledge requets would be to take a F&O position utilizing the collateral value completely on at least one day during the quarter.

 

Happy Trading,

Team Zerodha

Matti

Corporate Communications Manager @ Zerodha, perpetual student, an eccentric Grammar Nazi, rock lyrics police and voracious reader.

140 comments

  1. sunitha says:

    Thanks for the clarification, I got panicked by seeing mails that someone has invested in Reliance MF from Zerodha without my knowledge.

    • jalindar says:

      unused balance transfer to bank account in quarter is there any charges deduct form account
      please clarify unused means if i have trade for 1 day for quarter it calculated as used or unused fund in this
      condition fund transfer to back bank account or not

      • Venu says:

        No charges for transfer from our side. If you have used all your funds even for one day, then your account doesn’t fall due for settlement.

  2. vijay says:

    can u avail this facility

  3. Rajiv says:

    Can you please share the dates when this Quarterly settlement will take place. Thanks.

  4. Manujanshu says:

    Thanks for the info and the pain you guys take to inform traders & investors is really appreciative. Advice for Nikhil, don’t be a Grammar Nazi.

  5. Sujith says:

    How I will know the pay out date? I believe it is different for each client right? Is it mentioned anywhere in Pi or Q?

  6. Sujith says:

    How to know the settlement date? will it happen on specific day or qtrly settlement is different for each client?

  7. Srinivas says:

    What happens if say the value of my pledged securities is about 16 Lacs and I use only about 5 Lacs for overnight positions and the rest is in reserve for fresh trading opportunities.

    • Venu says:

      If you haven’t used full collateral margins, then the securities will be unpledged and transferred back to your account. You can pledge again, if you wish to.

  8. Siddharth Jain says:

    Would this overnight fund buying mean that it will be considered speculative buying and hence, one may be classified as Trader instead of investor?
    A person who does not deal in F&O or day trading would NOT like such a thing to happen automatically as it can lead to liability in terms of filing ITR4 vs ITR1/ITR2.

    Could you please clarify?

  9. gaurav says:

    thanks zerodha for informing clients about this and other things, like the excess stt on option on expiry day that was an eye opener

  10. surendar says:

    Good info. This time, while Zerodha did the buy, I had to call and ensure the trading amount got credited back. can you ensure this process is also automatic?

  11. Piyush says:

    What will be cost of this transactioin ? What are the chance of loss due to difference in NAV of debiting and crediting ? or There will be no loss. eg. A account has one lakh rupees, you will debit one lakh rupees in evening and credit one lakh rupees in next day morning without loss of single rupee.

    pls reply.

  12. R.Manojmurthy says:

    Sir am day trader 15000 rs margin so what you i do?

  13. KA says:

    Dear Sir,

    Investing the surplus funds in liquid funds or liquidbees overnight is a welcome idea. But, pls confirm whether we will lose any value, due to change in NAV value of MF units. Shall I assume that Whatever, we are investing overnight will get credited into the account the next day morning,

    Regards,
    KA

  14. denny says:

    what happens to the interest earned for that short time from the liquid fund ?

  15. firoz says:

    can i buy stock today with my funds?

  16. amol b babhulkar says:

    what is date of my quarterly settelment

  17. Bhavya says:

    Past performance of liquid fund. Is it in line with FD interest rates

  18. Chandra G Dilip says:

    I want to open an account.
    As i am interested in F& O trading.

    Please let me know the margin amount that i can use if i have 1 lac cash in demat amount.??

    And also in case if i hold shares of about 1 lac in demat??

  19. Jinesh says:

    “In case of pledged securities, the only way out of not having to go through the entire pledge/unpledge requets would be to take a F&O position utilizing the collateral value completely on at least one day during the quarter.”

    1) Does this mean that, if collateral value was completely used in ‘any one day’ during quarter, pledge/unpledge hassle will not happen ?

    2) If collateral value is partially used during quarter, how will quarter settlement process work ?

    • Venu says:

      1. Yes
      2. If it’s used partially during the quarter, the day your account is due to be settled, the unused collateral stock will be transferred back to your account.

      • Jinesh says:

        Ok.

        1) So, if my collateral value is Rs.100,000 and have used max Rs.80,000 on any single day in quarter. 20k unsued collateral will be transferred back ?
        2) how can I know exactly how much collateral value I have used in a quarter ?

        • Venu says:

          No, you could have used collateral worth 80k on an earlier day. What gets transferred back is the unused collateral on the day your account is due for settlement. You can track the margins from your ledger.

  20. Aniruddha says:

    Can I enable automatic purchase and subsequent day sale of liquid MF on daily basis from zerodha account, something similar to what happens once in a quarter.

  21. Biswajit says:

    I notice that Zerodha does not have provision for Agri scripts such as Jeera, Soya bean, Mustard seed etc.

    1. Do you have specific reason for this?
    2. Do you intend to start these in future?

    • Firstly, we have very few people trading agri and secondly risk management on these contracts are extremely tough. Very tough to take the risk with our razor thin margins. No plans to start as of now.

  22. Harish Balaji Ramachandran says:

    For ‘Buy overnight liquid fund with no transaction costs’ option, if I have Rs. 10,000 as balance then I hope I’ll be credited back not less than Rs. 10,000 back to my account automatically the next morning that will be available for investment. I understand that you have mentioned that there are no charges by Zerodha. Is there any additional cost involved like DP charges etc., since the fund will be debited/redeemed from demat account?

  23. Dinesh says:

    1: Other trading firm maintains fixed dates for Quarterly settlement.
    2: if you guys buy overnight liquid funds how I am going to check it via Ledger.

    • Venu says:

      1. It isn’t possible to have a fixed date, since ledger balances change everyday.
      2. There would be debit and credit entries of the purchase/redemption on your ledger.

  24. PANKAJ KUMAR GUPTA says:

    i am a client of zerodha from last 1.5 years . But i am listening this rule 1 st time . i haven’t recieve all fund in my bank account . never . why?

  25. Akash Malhotra says:

    Does Zerodha provide the facility of parking your money in overnight liquid funds while waiting for price of a stock to correct? Back in 2015, BSE introduced overnight liquid funds on its Star MF platform with the same motive.

  26. Ritesh says:

    Hello,

    What exactly happens when we select “Buy overnight liquid fund”, since the liquid fund price changes everyday, say the NAV price increased by 0.02%, if my free balance is Rs 20000, will it increase to 20004 or it will remain 20000 only.

    The reason for asking is i have this option enabled, but didn’t notice any change in free balance, How to check this transaction…

    Regards,

    • Ritesh, this option works only for 1 day in a quarter. Unless the underlying NAV changes, you won’t get a return for that day.

      • VISHAL says:

        Hi Nithin,

        can you pls explain in little detail?
        What if underlying NAV changed? Let’s say it goes negative, what happens then?

        Thanks

        • VISHAL says:

          And if i choose option of buying overnight liquid fund:
          1. When will the fund be deposited back to my trading account?
          2. and Do i have to initiate request for this or is it automatic process?

          Thanks in advance!

          • If you use the overnight liquid fund option, it would be as good as the money exists in your account. Goes from your account after trading hours and comes back next day before market opening. Everything is automatic, you don’t have to do anything.

        • These are liquid funds with massive AUM, NAV going down is extremely tiny. But this can be held longer also if required to recover any drop

          • Vikash says:

            Is it possible to buy liquid fund and remain in that fund and also place stock orders for delivery etc.
            Say – I have 50000 as unutilized fund and liquid fund is bought and now I don’t redeem it and my free balance is zero. Now I place order for any delivery on share for price 10000, will I be able to buy the shares.
            Of course after I buy the shares I will redeem the MF to match this transaction.

            Or the second case, say at 9:15 I place an order to redeem my liquid MF fund, will it be credited back within that day market hours so that I can place my other delivery etc. orders.

            • Ah no, not possible. You need to have cash in your account. If you buy liquid bees (instead of liquid fund, works similar),you can sell it and use it to buy more stocks.

  27. Swarna says:

    This is absurd mainly because it was not informed (at least to me) . Why are the contact details taken if you are not using those to share such important information.
    I was shocked to get the MF statement at my address and I was about to take it up with SEBI as I was not aware of any such thing happening from Zerodha. And that too this happening in December when demonetization effects were in its peak, I thought someone has used my account to turn their black money into white as these transactions are shown in PHYSICAL mode !!!
    Suggestion: When you want to introduce any such new feature, ensure that it has been communicated with customers and don’t turn them ‘on’ by default. Let the customers subscribe to it.

  28. Suresh Sharma says:

    Sir,
    By what time, you will be able to show individual’s stock/s purchased in individual’s account which remains directly linked with market just after its purchase, ( i.e. FOR THE TRANSITION PERIOD untill it comes to individual’s D-mat account ) so that BTST facility could be used by individual as per the actual available, till it comes in D-mat account of individual.

  29. Suresh Sharma says:

    Sir,
    In my view, Portfolio should also has capability to show stocks- holdings sector-wise too, alphanumeric wise etc. and need some more features to add like others.
    This is my suggestion and should not be taken otherwise.

  30. Sunith D K says:

    Dear Nithin,

    I had a lot of confidence in Zerodha Q untill this happened two days back.
    My profits realised till Jan 24 th was 4, 30, 000 Rs ( Q was exactly showing the same. And i also have my own track of my profits ).

    The next two days, i was not able to log on to Q, and yesterday when i see the realized profits its showing 3, 44, 000 Rs ( Around 90000 Rs less ) And i havent done any trades in these days.

    And i checked the profits realised during an earlier Period, even that also is shown 90000 Rs less, i have the screen shot saved for this earlier period. So i have attached the screenshot and raised a ticket already.

    Nobody has even looked into the issue or contacted me, and i m here worried about my Funds in your system. I have made almost 5 Or 6 Calls to the support center, every body has only one answer, they have intimated the concerned Person and he ll contact me by the end of the day and rectify the problem . I dont know who this person is, and nobody has contacted me.

    I dont have the number of any person who can help me in this regard. So i kindly request you to look in to this issue.

    My ticket number is 766776. If you can give the numbers of some senior persons ( I dont think the support team is able to underatand what i m speaking to them. I already had enough calls with them ) I can tell them the situation.

    Please rectify this issue because i didnt get any response from the service team yet and i am still worried about this mismatch shown in Q.

    Atleast give a contact number where i can explain what is the problem, and a person who can understand and give the solution

    I hope you can understand a person’s frustration when its related to his funds.

    Thanks and Regards
    Sreejith
    9072185491

    • Having this checked Sreejith, there is nothing to worry. P&L is a report, doesn’t affect the account balances. I am getting someone check this. Our tech team doesn’t work saturdays and your ticket has come in only late afternoon yesterday, they will be able to come back only on monday.

  31. vicky says:

    I am a new trader, in my fund’s section total account balance is 5k but for withdrawal only4.89k are available.Is there any charge levied on me(i bought intraday stock with margin and sold them on the same day).please clarify.

  32. Mohit Chhillar says:

    Hi,

    Is there a statement issued whenever these transactions are done. If have selected the option for last 1-2 months and my average overnight balance is 2L, but i have never got any intimation of any transaction. IS there is place i can go and check the transactions ?

  33. omprakash says:

    i need to deselect both the options..i selected suddenly..could u do it for me plz

  34. vishal says:

    How to uncheck the checkbox ? Its not allowing us .

  35. Sanchita Chatterjee says:

    Dear Nikhil,
    The quarterly settlement payment has not yet reached my bank account since November 11 2016. Could you please let me know the reason behind such a delay? I would like to have the money in Zerodha trading at the earliest or in my bank account which ever is convenient for you.
    Thanks
    Sanchita

  36. saidarao says:

    Hi Nithin,

    For quarterly settlement, in case of cash, you said 125% of margin money will be kept. I would like to get clarified on this. For example if Rs 100 is blocked for various margins, will you allow additional Rs 25 cash or Rs 125 cash in trading account?

  37. Deepesh Godha says:

    Hi Nitin,

    My client id is DD2228.

    Amount of Rs.16000/- debited towards quarterly settlement.

    Within what time it will be appeared in my bank / trading account for trading.

  38. Dileep Joshi says:

    Sir I have only trading account with u, will this system work for me.

  39. Ajit Nayak says:

    I just wanted to know that i have ticked the option under profile tab that “Buy overnight liquid fund with no transaction costs” What does this means actually could you please explain

  40. ZW7201 says:

    I just wanted to know that i have ticked the option under profile tab that “Buy overnight liquid fund with no transaction costs” by mistake and now I am trying to deselect that option but I am unable to do it. Help me.

    • Can you email [email protected] if you are not able to untick. Btw, if you have ticked it, you are saved the inconvenience of receiving back money once every quarter to your bank and you also having to bear payment gateway charges. Overnight liquid funds will most probably give you interest for that 1 overnight day it was bought in your account.

  41. Alok says:

    Hi Nithin,
    I have opted for the overnight liquid fund option and I got an email from the AMC confirming the purchase.
    My question here is – will the redemption the next day be automatic or do I need to do it?
    Also, it would be helpful if we can see this transaction in mf.zerodha.com since essentially this is an investment in a mutual fund.

    Thanks,
    Alok

  42. Soumitra Chatterjee says:

    Hello Nithin Sir,

    I have opted for the overnight liquid fund investment option and I receive an email from the AMC for purchase.
    Here my question is,
    Is this investment for only 1 night? And when will I got back the money in my trading account?

    Regards,
    Soumitra Chatterjee

  43. ROHIT SHARMA says:

    hi nithin sir,
    i have been trading continuously since june 2016 in F&O but still on 10th march my funds has been (32145/-) transferred to bank account. i started sip as well for 10th every month. that is also cancelled due to shortage of funds in account.
    can u pls explain why this happened.

  44. Muralidar says:

    today 5th april 2017 amount is still lying in liquid fund and not redemmed and credited back to my account. And my account is showing negative balance.

    • Venu says:

      The purchase and redemption entries have already been posted. Your account is already in a credit. You can check the same on your ledger.

      • Muralidar says:

        though my zerodha account is showing the correct balance, when I request a statement from AXIS Mutual fund using the folio number it shows that the amount is still lying with them and earning daily dividend even as on 6th april. This is after you have redeemed the units and credited my zerodha account. Please clarify what is the amount/units balance being shown by axis mutual fund as lying in my folio.

  45. surendra says:

    Hi,

    I haven’t started any trading yet. nor funded the account. But my Equity account balance show -ve(negative) balance.
    Please help to understand the same.

    thanks in advance

    • Venu says:

      You opened your demat account in the last Financial year. We compute & levy AMC on the demat account on 31st March every year; hence the debit.

  46. Chandrakanta Kabra says:

    I am receiving Margin Statement for every day for NSE and BSE separately. Why there is constantly negative balance in BSE margin Statement from the day I stated Trading. Is there something to be done from my side? Please Advise.

    • Venu says:

      As brokers, we are required to maintain segment wise balance for all accounts. If you transfer any money to your trading account, the credit would be given to NSE-EQ segment. However these funds would be available for trading in any of the segments that you’re active in.

      For eg: If you have transferred Rs.100 to your trading account, credit of this would be given to NSE Eq segment. However you can use these funds to trade in Equity/F&O/CDS Segment provided you have the exchange enabled. If you utilise these funds for trading in F&O and make a loss of Rs.30 then your NSE Equity Balance would continue to show Rs.100 credit while your F&O segment would show a balance of minus 30 thereby making your balance across all segments as Rs.70 (100cr in EQ – 30dr in F&O).

      This is the reason why you see a debit in your BSE statement. You will have to view your balance across all segments to know the your actual balance in the trading ledger.

  47. Gautham says:

    Are there any entry and exit charges money being transferred in and out of these liquid mutual funds? If so, what are the charges?

  48. MNK says:

    will it automatically credited on next day morning?
    what if I don’t wont back in next day morning and keep in liquid fund for more 2 weeks and so.? any other way to do so?

  49. Maya says:

    Dear Sir,

    My Tax P & L statement is not correct. Gain from IPO is not being included on it. I have already mentioned IPO allotment date details on discrepancy list. It is quite sometimes not being synchronized all this info in your software.
    Please rectify at your end as early as possible. I have already communicated all this issue with your support team. But, work is yet to be done properly.

  50. Vinoth says:

    whether Buy overnight liquid fund facility is available for underutilized Balances in commodity segment.

  51. Qamar says:

    Is there any option to get the balance transferred to the bank account earlier than the quarter end?

  52. Mohd Taha says:

    I accidentally clicked on ‘Buy overnight liquid funds with no transaction cost’. It is showing a tick mark over there now. Please help.

  53. Primal says:

    Sir,
    Can we place the order before market open , as stop loss & tgt in previous day holding position in fo.
    Pls explain how it is work ?

  54. Ketan Mehta says:

    I just wanted to know that i mistakenly ticked the option under profile tab that “Transfer funds back to bank account” What does this means actually could you please explain? Is there any charges for this facility ?

    • THere are no charges, once a quarter funds will be sent back from trading to demat. You will have to transfer it back to trading, there might be a payment gateway cost to it. You can change this option back.

  55. Abhineet Saini says:

    Hi, actually i am new to Zerodha and while surfing the q for the first time I by mistake ticked the option of transfer the funds to my bank account.
    I actually do not want this facility but I can not uncheck the option so please help me.

  56. Pravin kumar says:

    I think option for buy overnight liquid fund is only for save payment gateway charge only .I am correct sir ?

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