What is interoperability?
Interoperability is about the seamless clearing and settlement of equity transactions across exchanges. Before this, trades made through NSE were cleared through NSE Clearing Limited and BSE through ICCL. Interoperability between clearing corporations ensures that trades made on both NSE and BSE (Equity, CDS, and NFO) are settled through a single clearing corporation.
How does interoperability work?
Prior to interoperability, trades executed on NSE were cleared and settled only through NSE Clearing Corporation (NSCCL). Similarly, transactions executed on BSE were settled through Indian Clearing Corporation Ltd (ICCL) while the trades executed on the Metropolitan Stock Exchange (MSEI) were cleared and settled through Metropolitan Clearing Corporation of India (MCXCCL). With interoperability, trades can be cleared and settled across clearing corporations seamlessly.
Let us take the case of an investor who trades on BSE and NSE. Prior to interoperability, he would arrange for margin and capital separately at each clearing corporation. Effectively, this resulted in duplication of margin funding and therefore sub-optimal allocation of capital. Interoperability across exchanges gives a link across all the clearing corporations in the market. This permits consolidation of clearing and settlement function at any one of them.
Is interoperability applicable to both, Intraday and Delivery?
Yes, interoperability is applicable to both, intraday square-off trades as well as delivery trades. In fact, intraday becomes more efficient and profitable under the new set-up. For intraday traders, the big advantage is that you can square-off trades across exchanges. As a result, cross-exchange buying and selling can be construed as intraday, if the net position amounts to zero. In such cases, intraday charges will be applicable, which are often lower than the charges for delivery trades.
Will I be charged for interoperability?
No, there are no additional charges for interoperability as it is just connectivity between the exchanges. In fact, it is estimated that due to interoperability, your costs could actually come down, since the trading members have to
now hold less margins with multiple clearing members.
Is interoperability available on Upstox?
Although we are geared to support interoperability, our OMS/RMS vendor will need up to three months to make things possible from our end. This is the case with almost all brokers in India. We are trying our level best to reduce this time frame.