The clearing and settlement system means finalizing the financial position for stock brokerage companies resulting from buying and selling transactions executed on the stock exchange. Generally the main objectives of clearing and settlement are to mitigate the potential risks emanating from the receipt and delivery of securities and to carry out the clearing and settlement transactions and transfer of securities ownership within a definite time frame.
Currently cash settlement is based on daily balance of net trades (debt – credit) between basic brokerage house and CSDI. The basic brokerage house acts on behalf of their agents in different cities for settlement purposes with the clearing house. Both the securities and cash must be available during the settlement process. The cash settlement takes place in T+3. Members with net payable due to CSDI should deliver the amount to the clearing house since other member party receives their amounts.
The settlement of securities takes place no later than T+1 and CSDI generates the reports to each TSE member company concerning all their share activities and details of transaction on daily basis. CSDI uses a customized type of DVP2 system for settlement and is also trying to achieve the DVP system for transferring the securities. In fact the clearing and settlement system is aimed at the execution of clearing and settlement at an exact time and also speeding up securities turn-over as a result of guaranteeing the completion of the settlement in a specified time. The clearing and settlement take place at T+1 for corporate bonds.