What is Quarterly settlement?
According to SEBI's regulations, all brokers have to settle client accounts every 30 or 90 days.
How does this impact you?
Due to these regulations, free funds available in your trading ledger will get credited to your registered primary bank account on the first Friday of every financial quarter.
The settlement of funds and securities through quarterly settlement is an initiative by SEBI ensures higher security of traders funds and securities.
Free funds refers to the balance that remains unutilised in your fund balance after considering any upcoming funds Pay-in obligation to the exchange for any trade done and 225% of margin after adjusting for any stocks that have been pledged as of the settlement date. ( Refer to example below )
If you have not traded over the previous 30 days, your funds balance will be credited back to your primary bank account registered with us.
Refer to the following link to check the SEBI circular of Securities & Commodities accounts.
Example:
Assume you have ₹1 lakh in your account and have taken 2 lots of Nifty options (assume the margin for one lot of Nifty is ₹27,000), then ₹54,000 would be blocked from your account leaving you with a balance of ₹46,000.
The Exchange allows a broker to block 2.25 times the margin it levies for the open position held by the client and after blocking this 2.25 times margin if there is any credit, it needs to be reversed.
In the above example, 2.25 times ₹54,000 would be ₹1,03,500. Since the funds available in your account are only ₹46,000, there will not be any settlement in this case.
However, after applying the 2.25 margin rule, if there is any credit standing in your account, such funds will have to be reversed to your bank account.
To sum it up, settlement will happen first Friday of every January, then April, then July and then October.