Market type
The code identifying which market segment or settlement type a trade belongs to — normal, auction, and so on — that must be recorded on the DIS alongside the stock exchange name and settlement number.
In plain language
A stock exchange does not run just one kind of trading. It offers several market segments, split by the kind of settlement or trade involved. In the depository system, each of these segments has its own code, called the market type.
A delivery instruction for a market transaction is incomplete without it: the DIS must name the stock exchange, the market type, and the settlement number together, because a clearing member's holdings are tracked separately for each combination of the three.
How it works
From Chapter 8, section 8.3.1: stock exchanges offer different market segments, "denoted as 'market type' in the depository system." The DIS must contain the name of the stock exchange, the market type, and the settlement number for which securities are being transferred to the clearing member account — details the broker's contract note or trade confirmation slip supplies.
Market type matters because a clearing member account keeps securities in a bucket of a specific market type and settlement number combination. Moving securities between two such buckets — say, when a CM needs to shift a balance from one market type-settlement number pairing to the one from which pay-in must actually be effected — is exactly what an inter-settlement transfer does.
A worked example
A broker trades on the BSE in both the normal market and the auction market. Securities delivered against a normal-market trade sit in one bucket of the broker's CM account, identified by "normal" market type and settlement number 2024118; securities delivered against an auction-market trade sit in a separate bucket, under a different market type, even within the same CM account.
When the broker's client submits a DIS to deliver 300 shares for the normal-market trade, the form must specify BSE, market type "normal," and settlement number 2024118 — leaving any of the three off, or mismatching them, means the instruction cannot be matched to the correct settlement obligation.
Why NISM asks about it
Chapter 8, section 8.3.1, defines market type as one of the mandatory DIS fields for a market transaction, alongside settlement number and Clearing Member details. Expect it tested as part of what must appear on a DIS, and as the reason inter-settlement transfers between buckets are needed.
Common exam traps
- Market type identifies the trading/settlement segment, not the stock exchange itself — both must be stated separately on the DIS.
- Securities are held in separate buckets by market type and settlement number combination, even within the same clearing member account — this is exactly why inter-settlement transfers exist.
- The contract note/trade confirmation slip is where the client gets the settlement details, including market type, to complete the DIS correctly.
Check yourself
1.Who is required to give inter-settlement instructions to the Participant for securities lying within the same CM account but in a different settlement pocket?
- a)The stock exchange
- b)The Clearing House
- c)The depository
- d)The Clearing Member
Show the answer
Answer: (d) The Clearing Member
Clearing Members are required to give inter-settlement instructions to the Participants for securities lying within the same CM account but in different settlement pockets.
The reason is structural: in a clearing member account, the securities are always kept in a bucket of specific market type and settlement number. Shares waiting under one settlement number cannot be used for pay-in under another until the CM moves them.
The exchange, the clearing house and the depository all sit outside this decision — only the CM knows which obligation he intends to meet from which holding.
2.Every settlement number has a trade beginning day, a trade-ending day, a settlement pay-in day and a settlement pay-out day. What are all these days collectively called?
- a)The settlement calendar
- b)The market type
- c)The settlement pocket
- d)The pay-in file
Show the answer
Answer: (a) The settlement calendar
The workbook: "Every settlement number has a trade beginning day, trade-ending day, settlement pay-in day and settlement pay-out day etc. ... All these days collectively are called 'settlement calendar'." Stock exchanges divide a year (financial or calendar) into settlement periods, give each one a settlement number, and the depository system gives complete details of the settlement calendar for each stock exchange.
- Market type (B) is the name for each market segment, with segmentation done by the type of settlement or type of trade.
- Settlement pocket (C) — in a CM account, securities are kept in a bucket of a specific market type and settlement number. Moving them between buckets needs an inter-settlement instruction.
- Pay-in file (D) is how securities made available for pay-in before the deadline are informed to the CC.
3.A tender offer instruction in the depository system can be cancelled by the Participant when its status is:
- a)"Instruction Ready for Settlement"
- b)"Overdue" or "Future Dated"
- c)Any status, up to the settlement date
- d)No tender offer instruction can ever be cancelled
Show the answer
Answer: (b) "Overdue" or "Future Dated"
Participant will not be able to cancel the tender offer instructions executed in the depository system and that are in the status "Instruction Ready for Settlement". However, tender offer instruction which is in the status "Overdue" or "Future Dated" can be cancelled by the Participant.
And the general rule: the aforesaid tender offer instruction executed from demat account of the client will be the irreversible nature instructions.
What a tender offer covers: mechanism for acquisition of shares through stock exchange mechanism pursuant to tender-offers for the purpose of takeovers, buy back and delisting of securities.
The six details a client must give on the delivery instruction slip or electronic instruction: Execution Date · Tender Offer Type (i.e. Market Type) · Event Number (i.e., Settlement Number) · CM BP ID · ISIN · Quantity.
What then happens: upon submission of the delivery instruction in respect of tender offer in eDPM system, if sufficient balance is available in the demat account of the client, requisite quantity will be blocked in the demat account of the client in favour of respective Clearing Corporation based on the market type and settlement number of tender offer.
The shares are blocked in the client's own account, not transferred.
Except on an inter-depository instruction: upon receipt of inter-depository instruction in respect of tender offer where the target account in NSDL system is a Clearing Member Pool Account, the shares will be automatically transferred to the Clearing Corporation.
And the clearing member's burden is reduced: Clearing Members will not be required to submit any instructions i.e. neither physical DIS or electronic instructions to the Participants for executing Irreversible Delivery Out (i.e. early Pay-in) instructions in favour of Clearing Corporation, as was done previously.
Where this is taught
Free preparation for NISM Series VIRelated terms
- Settlement numberA unique identifier tagging a trade or batch of trades to a particular settlement cycle and date, used by brokers, clearing corporations and depositories to match and reconcile obligations.
- Clearing member accountThe special demat account a broker or custodian opens to settle exchange trades, through which clients' sold shares go to the clearing corporation and bought shares arrive; also called the pool account.
- Inter-settlement transferAn instruction by a clearing member to move securities within its CM account from one market type-settlement number bucket to another from which pay-in is actually to be effected.
- Market transactionSettlement of a trade executed on a stock exchange, moving through a Clearing Corporation/House and the seller's and buyer's clearing member accounts — as opposed to an off-market transaction settled person-to-person.
- Tender offerThe depository-system mechanism, used for takeovers, buybacks and delisting, that blocks a shareholder's securities in favour of the Clearing Corporation once a tender-offer delivery instruction is submitted.