Clearing and Settlement — who guarantees your trade, and how

The problem this chapter solves

You buy one Nifty futures contract at 25,000. Somebody, somewhere on the exchange, sold it to you. You have never met them. You do not know their name, their bank, or whether they will still be solvent in three weeks.

And yet you are perfectly relaxed about it. Why?

Because of one legal idea: novation.

According to the legal principle of "novation", the Clearing Corporation becomes the central counterparty to all trades that take place on the exchange's derivatives platform. The moment your trade is executed, the original contract between you and that stranger is torn up and replaced by two contracts — you against the Clearing Corporation, and the Clearing Corporation against them.

The Clearing Corporation not only acts as a legal counterparty to all trades in this segment but also guarantees their financial settlement. You never carry the stranger's credit risk. The Clearing Corporation does.

That guarantee is not free, and the rest of this chapter is the price of it — margins, position limits, monitoring, penalties and funds.

Three activities, three sets of people

The clearing and settlement process comprises three main activities: Clearing, Settlement and Risk Management. These are carried out by the Clearing Corporation with the help of Clearing Members and Clearing Banks.

The three types of clearing member

Note the asymmetry. A self-clearing member serves only itself and its own clients. The other two take on other people's trades — and because of that, both trading-cum-clearing members and professional clearing members are required to bring in additional security deposits in respect of every trading member whose trades they undertake to clear and settle.

What a clearing member actually does

• Clearing — computing obligations of all his trading members, i.e. determining positions to settle
• Settlement — performing actual settlement
• Risk Management — setting position limits based on upfront deposits / margins for each TM, and monitoring positions on a continuous basis

Clearing banks

Funds settlement takes place through clearing banks. Every clearing member must open a separate bank account with a Clearing Corporation designated clearing bank for the F&O segment. Not the same account as the rest of the business — a separate one.

What it costs to become a clearing member

How positions are added up

Clearing starts with arithmetic: calculating open positions and obligations of clearing members.

The chain runs upward:

• A trading member's open position = his proprietary open position + client open long position + client open short position
• A clearing member's open position = the aggregate of the open positions of all the trading members and all custodial participants clearing through him

And there is a crucial asymmetry inside that, which the exam tests directly:

• Proprietary positions are calculated on a NET basis (buy − sell) for each contract
• Client positions are arrived at by summing together the net positions of each individual client — one client's long does not cancel another client's short

Here is the workbook's own illustration. Clearing member A has two trading members, PQR and XYZ, both trading the Nifty May contract.

Clearing member A's open position:

Read XYZ carefully — that is where the marks are. His three components are −1000, +1000 and −1000. They do not net to −1000. The long 1000 is reported as long, and the two shorts of 1000 each are added to 2000 short. Longs and shorts sit side by side on the clearing member's book; they do not cancel.

Interoperability of clearing corporations

Until recently, every exchange had its own clearing corporation, and to trade on another exchange you needed membership of that exchange and its clearing corporation. Participants ended up maintaining collaterals and margin deposits at multiple clearing houses, which meant inefficient allocation of capital and higher trading costs.

SEBI proposed a framework for interoperability among clearing corporations in 2018, and the idea was implemented in 2019. Now trades done on any exchange can be cleared and settled by the clearing corporation of any other exchange, and brokers can choose a single clearing corporation for all their trades.

What it buys the market:

• Reduction in trading costs — margins and collaterals with a single clearing corporation instead of several. This is described as the main advantage.
• Better utilisation of capital resources. The workbook's example: a client long 10 lots of SBI May futures on NSE and short 6 lots of the same contract on BSE now has a net position of long 4 contracts, and margin is computed on that.
• Resilience. If trading is disrupted at an exchange, or the link between an exchange and its clearing house breaks, brokers can still route their trades to other clearing corporations, so clearing and settlement are not affected during a trading glitch.
• Simpler operations — comply with the requirements of a single clearing corporation.
• Healthy competition among clearing corporations, expected to improve the pricing of their services.

Settlement — cash or delivery?

One date changed this chapter permanently. Since October 2019, all positions in futures and options on individual securities which remain open on the expiry date must be settled by PHYSICAL DELIVERY. Index futures and options continue to be settled in CASH.

Learn that split. Almost every settlement question in this chapter begins by deciding which side of it you are on.

Futures: two settlements

(A) Mark-to-market (MTM) settlement — continuous, at the end of each day.

MTM is a process by which margins are adjusted based on daily price changes in the markets for underlying assets. The profit or loss is computed as the difference between:

• the trade price and the day's settlement price, for contracts executed during the day but not squared off
• the previous day's settlement price and the current day's settlement price, for brought forward contracts
• the buy price and the sell price, for contracts executed during the day and squared off

The clearing member who suffers a loss pays the MTM loss amount, which is passed on to the clearing member who has made an MTM profit. Clearing members are responsible for collecting and settling the daily MTM of the TMs and clients settling through them.

After the day's settlement process, all open positions are reset to the daily settlement price. These become the open positions for the next day.

The daily settlement price for futures contracts is based on the last 30 minutes volume weighted average price of such contract across exchanges. If a contract was not traded during the last half an hour, a theoretical daily settlement price is computed as F = S × e^(rt), where S is the value of the underlying index or security, r is the rate of interest — which may be the relevant MIBOR rate or such other rate as specified — and t is time to expiration.

Daily MTM is cash-settled. The pay-in and pay-out are effected before the start of market hours on the next day, by debit or credit of the clearing accounts of clearing members with their clearing bank.

(B) Final settlement — on the last trading day.

On expiration day, after the close of trading hours, the clearing corporation marks all positions of a clearing member to the final settlement price. All long positions are automatically assigned to short positions with the same series, on a RANDOM basis — for cash settlement or delivery settlement, whichever applies.

The final settlement price for a futures contract is based on the last 30 minutes volume-weighted average price of the relevant underlying security or index across exchanges on the last trading day. Notice the difference from the daily price: the daily one is derived from the futures contract, the final one from the underlying.

For cash-settled futures (index futures): positions brought forward are settled for the difference between the previous day's settlement price and the final settlement price, cash settled along with daily MTM on T+1. Positions opened on the expiry day itself settle for the difference between the trade price and the final settlement price.

For physically settled futures (stock futures): final exercise settlement is implemented on T+1, where T is the expiry date. The delivering clearing member must complete delivery instructions to transfer securities to the Depository pool account by the depository's cut-off time. The depositories then credit the receiving member's pool account or the client's beneficiary account.

Unexpired futures on expiry:

• Long futures → a buy position — security receivable
• Short futures → a sell position — security deliverable

The workbook's two worked cases. Lot size 1500, final settlement price ₹475, previous day's settlement price ₹482.

Mr P is long one lot. He must take delivery of 1500 shares on T+1 at ₹475. Obligation = 1500 × 475 = ₹7,12,500, and he must have that money in his bank account. In addition, the difference (475 − 482) × 1500 = ₹10,500 is collected from him as daily MTM, in cash, on T+1.

Mr Q is short one lot. He must deliver 1500 shares on T+1 at ₹475, and must have those shares in his demat account. In addition, that same ₹10,500 is credited to him by way of daily MTM.

Two separate flows, on the same day: the delivery leg at the final settlement price, and the cash MTM leg for the price move. Candidates who report only one of them lose the mark.

Options: two settlements

(A) Daily premium settlement. The buyer pays the premium and the seller receives it. Amounts payable and receivable are netted per client per option contract. Clearing members with a premium payable position pay the clearing corporation, which passes it to members with a premium receivable position. It is directly credited or debited to the clearing member's clearing bank account on T+1 day, where T is the trade date.

(B) Final exercise settlement. All in-the-money (ITM) stock options contracts are automatically exercised on the expiry day. ITM contracts are those that have some intrinsic value on the expiry day.

Index options. European-style — exercisable only on the expiry day. All long ITM positions are automatically assigned randomly to short positions in the same series. The final settlement price is the closing price of the underlying on the expiry day, and:

• Call options = Closing price of the security on the day of exercise − Strike price
• Put options = Strike price − Closing price of the security on the day of exercise

In other words, the final settlement amount equals the intrinsic value of the option at expiration. Settlement is in cash, by debit or credit of clearing accounts on T+1 day, where T is the exercise date.

Worked case: a call on an index with strike 17,500, index closes at 17,800, lot size 50. Settlement value = (17,800 − 17,500) × 50 = ₹15,000, cash, on T+1.

Stock options. Also European-style, but settled by physical delivery. Long ITM options are automatically assigned by the exchange on expiry day to short positions in the same series, on a random basis.

The four outcomes to memorise:

And the number that goes with it: the settlement obligation for an options contract is computed at the respective STRIKE PRICE — not the closing price.

Worked cases, both with strike ₹475 and lot 1500:

• Mr P, long one lot call, stock closes at ₹510. The call is ITM because the settlement price exceeds the strike. He takes delivery of 1500 shares on T+1. Exercise settlement value = strike × lot = 475 × 1500 = ₹7,12,500. He needs the money.
• Mr Q, long one lot put, stock closes at ₹410. The put is ITM because the settlement price is below the strike. He gives delivery of 1500 shares on T+1. Value = 475 × 1500 = ₹7,12,500. He needs the shares.

The mirror rules follow: a client assigned a short ITM put must have FUNDS equal to the final exercise settlement value (like a long ITM call), and a client assigned a short ITM call must have SHAREHOLDING equal to the lot size (like a long ITM put).

Net settlement of cash and F&O on expiry

Physical settlement created an absurdity: a client could be paying for shares in the cash segment on the same day as delivering shares in the F&O segment. So a net settlement mechanism was introduced to ensure better alignment of cash and derivatives segments, reduce price risk, and allow netting efficiencies.

The workbook's example. Mr A holds a long put on ABC Ltd with a strike of 110. He buys shares of ABC Ltd at ₹101 on the expiry day. The settlement price on expiry day is ₹100, so his put is in-the-money.

• Under the earlier rules: pay ₹101 on T+1 and receive the shares. Then deliver those shares against the long put and receive the strike price of ₹110. Two full round trips of money and securities.
• Under net settlement: no funds pay-in of ₹101. He simply receives a funds pay-out equal to the difference between the strike price of his put and the purchase price of the shares — ₹9. And there is no security pay-in or security pay-out at all.

But the eligibility is narrow, and this is exactly what gets tested:

• Available only to investors who trade and clear through the SAME TM–CM combination in both the cash and F&O segments
• Not available where the TM clears through a different CM or Clearing Corporation
• Not available to institutional investors

Risk management

The salient features of the risk containment mechanism in the F&O segment:

• Stringent capital adequacy requirements for membership — a financially strong member is itself a risk control
• The clearing corporation charges an upfront initial margin for all open positions of a clearing member, specifies initial margin requirements for each contract on a daily basis, and follows Value-at-Risk (VaR) based margining. The CM collects initial margin from TMs, who collect from clients.
• Open positions are settled on an MTM basis for each contract at the end of the day
• The clearing corporation's online position monitoring system monitors a CM's open position on a real-time basis, sets a limit for each CM based on his effective deposits, and generates alert messages when a CM reaches pre-determined benchmarks of the limit
• A trading terminal lets the CM monitor the open positions of all TMs clearing through him, and a CM may set limits for a TM. The clearing corporation helps monitor those intra-day limits, and when a TM exceeds the limits it stops that TM from further trading.

Who is monitored for what is a favourite exam distinction:

The most critical component of the risk containment mechanism for the F&O segment is the margining system and online position monitoring, carried out online using SPAN®.

SPAN

SPAN stands for Standard Portfolio Analysis of Risk. It is a risk management and margining product designed by the Chicago Mercantile Exchange (CME), Chicago, USA, and adopted by Indian exchanges. It was developed for calculating initial margins.

The objective of SPAN is to identify the overall potential risk in a portfolio. It treats futures and options uniformly, while recognising the unique exposures associated with options portfolios.

Its basic objective is to determine the largest possible loss that a portfolio might reasonably be expected to suffer from one day to the next — and then set the initial margin at a level sufficient to cover this one-day potential loss.

The mechanism inside is the risk array: the extent to which a specific derivative instrument will gain or lose value from the present time to a specific point in time in the near future, over a specific set of market conditions. The time is set to one trading day.

Every margin in the system

Initial margin. Computed by the clearing corporation up to client level with the help of SPAN. It must be paid up-front, and here is the rule that generates a sample question every sitting:

Gross basis at the individual client level for client positions. Net basis for proprietary positions.

One client's long and another client's short do not offset for margin purposes. Only the member's own proprietary book nets.

Initial margin requirements are based on 99% value at risk over a ONE-DAY time horizon. But for futures contracts — on index or individual securities — where it may not be possible to collect the mark-to-market settlement value before the commencement of trading the next day, the initial margin is computed over a TWO-DAY time horizon, applying the appropriate statistical formula.

Premium margin. Charged at the client level, alongside initial margin. It includes the premium amount due to be paid to the clearing corporation towards premium settlement, and is levied till the completion of pay-in towards the premium settlement.

Assignment margin. Payable on assigned positions of clearing members towards final exercise settlement obligations. It is the net exercise settlement value payable by a clearing member towards final exercise settlement, and is levied till the completion of pay-in towards the exercise settlement.

Intraday Crystallised Losses (ICMTM). The rules, in the workbook's order:

• computed for all trades that are executed and result in closing out of open positions
• calculated on weighted average prices of trades and positions
• computed only for FUTURES contracts — not options
• part of initial margin, adjusted against the liquid assets of the clearing member on a real-time basis
• crystallised losses at contract level for a client are adjusted against crystallised profits from another contract for the same client
• all client level losses across all trading members, including losses on TMs' proprietary positions, are grossed up to arrive at the clearing member level figure
• released on completion of daily or final mark-to-market settlement pay-in

Delivery margins. Levied on the lower of potential deliverable positions or in-the-money long option positions, four days prior to expiry of contracts to be settled by delivery. The workbook's illustration: if expiry is on a Thursday, delivery margins on potential ITM long option positions become applicable from the EOD of the previous Friday.

They are part of the initial margins of the clearing member, computed at client level settlement obligation, and ITM options are identified based on the closing price of the security in the underlying Capital Market segment on the respective day.

They are collected in a staggered manner:

Positions converted to settlement by delivery after the expiry date become subject to the margins applicable in the Capital Market segment — VaR, Extreme Loss Margins and Mark to Market margins. Delivery margins blocked are released on completion of the settlement.

Exposure margins. The VaR and Extreme Loss percentage as computed in the Capital Market segment are applied on client level settlement obligations, and the rate is updated for every change in the margin rate in the Capital Market segment. Clearing members are subject to exposure margins IN ADDITION to initial margins — not instead of them.

Short Option Minimum Charge. This was a margin to cover the risk of short option positions in extremely deep-out-of-the-money strikes. SEBI has done away with the concept, vide its circular dated 24 February 2020. Know that it is gone; that is the whole point of it appearing in the syllabus.

Net Option Value. Computed as the difference between the long option positions and the short option positions, valued at the last available closing price of the option contract, and updated intraday at current market value when risk parameters are generated. It is added to the Liquid Net worth of the clearing member. The consequence is important: mark to market gains and losses are NOT settled in cash for options positions. Futures are cash-settled daily; options are not.

Protecting the client's collateral

Client margin reporting. The clearing corporation informs all members of the margin liability of each of their clients. Members must report details of margins collected from clients to the clearing corporation, which holds in trust client margin monies to the extent reported. Any non-collection or short collection of margins by members from their clients is penalised by the exchanges.

The pledge / repledge mechanism. Clients used to give their broker a power of attorney to move securities out of their demat account. Brokers misused it — diverting one client's securities to meet another client's margin obligations, or the broker's own proprietary positions, or to fund other businesses, and in some cases misappropriating dividends on shares held by inactive clients.

SEBI's new pledge/repledge mechanism came into effect from September 2020. Under it:

• Collateral can be provided only through a margin pledge, not by executing a power of attorney
• Depositories provide a separate pledge type called "margin pledge"
• The TM or CM must open a separate demat account tagged as the Client Securities Margin Pledge Account
• The TM can re-pledge to the CM only from that account, and the CM can re-pledge to the Clearing Corporation — so the complete trail of re-pledge is reflected in the demat account of the pledgor
• Since the security is only pledged and there is no transfer of title from the client to the TM, the risk of misappropriation is mitigated
• A client's securities re-pledged onward must be used to meet the margin obligations of that client only

Segregation and monitoring of collateral at client level. Reported daily.

A TM reports to its CM: client collateral received from individual clients, client collateral retained by the TM, and client collateral placed by the TM with the CM.

A CM reports to the Clearing Corporation all five: collateral received by the TM from individual clients, retained by the TM, placed by the TM with the CM, retained by the CM, and placed by the CM with the CC.

The purpose: the Clearing Corporation gets clear visibility of client-wise collateral at every level.

Peak margin

Client margin reporting used to be end-of-day only, so brokers allowed clients to run far thinner margins intraday. The workbook's illustration: a client's EOD requirement is ₹1 lakh, but he took and squared off several other positions during the day whose margin requirement was much higher — and the broker let him hold just ₹30,000 through the day. This amounts to excessive intraday leverage, which can lead to large losses on days of high volatility.

SEBI introduced peak margin computation through its circular dated 20 July 2020. Clearing corporations must send a minimum of 4 snapshots of client-wise margin requirement to TMs and CMs. The member reports:

• (a) the client's EOD margin obligation against client margin available at EOD
• (b) the client's peak margin obligation across the snapshots against the client's peak margin available during the day

The penalty is on the shortfall which is HIGHER of (a) or (b).

Then it was softened. By circular dated 10 May 2022, the margin requirements for the intra-day snapshots in derivatives segments are calculated on fixed Beginning of Day (BOD) margin parameters, which include all SPAN margin parameters as well as ELM requirements. By circular dated 1 February 2023, the EOD margin collection requirement from clients in derivatives is also calculated on fixed BOD parameters. SEBI clarified these changes are only for the purpose of verifying upfront collection of margins from clients — the margin parameters used by Clearing Corporations to actually collect margin obligations continue to be updated intra-day and at EOD.

The workbook's illustration: BOD margin requirement for a Bank Nifty weekly options trade is ₹10,000; you deposit ₹11,000. Volatility pushes the requirement to ₹12,000, and under the earlier peak margin rules a snapshot would have triggered a short margin penalty. Starting 1 August 2022 this penalty is not charged, because the beginning of day margin of ₹10,000 applies throughout the day's trading session.

Cross margin and early pay-in

Cross margining, in the workbook's own list:

1. Available across the Cash and Derivatives segments
2. Available to all categories of market participants
3. Only positions in the two segments to the extent they offset each other are considered
4. Where one clearing member clears for the client in both segments, he must intimate client details through a Collateral Interface for Members (CIM)
5. Where different clearing members clear the two segments, they must enter into necessary agreements
6. For benefit in respect of Index Futures and Constituent Stock Futures only, the clearing member in the derivatives segment must provide the client details

Early pay-in (EPI). Where early pay-in of securities is made, those positions are exempt from delivery margins. The same exemption applies where early pay-in of funds is made. It can be done through either depository: in NSDL, deliver securities to the pool account and execute irreversible delivery out instructions through the DP; in CDSL, transfer the security to the early pay-in account with CDSL.

Position limits

A position limit is a restriction on the ownership that limits the number of derivatives contracts a trading member or client, acting individually or together with others, can own. They exist to prevent traders from manipulating prices by accumulating control over the market or individual stocks through derivatives contracts.

SEBI has laid down three types: client-level, trading member-wise, and market-wide.

Client level

For F&O contracts on individual securities, the gross open position across all derivative contracts for a security for each specific client shall not exceed the HIGHER of:

• 1% of the free float market capitalisation (in number of shares), or
• 5% of the open interest in all derivative contracts in the same underlying stock per Exchange (in number of shares)

Client level limits, security-wise, are published on the Exchange website.

And a reporting duty: any person or persons acting in concert who together own 15% or more of the open interest on a particular underlying index must report this to the Exchange / Clearing Corporation. Failure to do so is a violation attracting penal and disciplinary action.

Trading member-wise

The Clearing Corporation specifies trading member-wise position limits on the last trading day of the month, and those apply during the next month.

Market-Wide Position Limit (MWPL)

MWPL for F&O contracts on individual securities is 20% of the number of shares held by non-promoters in the underlying security — that is, 20% of the free float in number of shares. It too is specified on the last trading day of the month for the following month.

Then three numbers that must be kept in order:

Note the asymmetry deliberately built in: you go into the ban at 95% but you only come out at 80%. That gap stops a stock flickering in and out of a ban all day.

Index derivatives — the newer limits

PAN level position limits for index options:

Position limits for index futures, on a gross notional basis:

Two rules about how these move: position limits are based on the total OI of the market at the end of the previous day's trade, and if OI drops compared with the previous day, market participants can breach the position limits. The stock exchange provides the facility for monitoring FutEq OI till 5 December 2025, after which broking entities are expected to have their own delta computing and monitoring system.

Intraday monitoring:

Exchanges monitor these through a minimum of four random snapshots during the trading day, including one snapshot between 14:45 hrs and 15:30 hrs — around market close, where heightened activity is generally observed.

When limits are breached

• Client level exceeded: the CM/TM must ensure the client takes no fresh positions and that existing positions are reduced within permissible limits. The exchange collects a penalty from the clearing member, who can recover it from the trading member or client.
• Trading member limit: monitored throughout the day. On violation the TM is not allowed to increase his open position in that security or index.
• MWPL violation: checked by the exchange at the end of every trading day. If, during a ban on fresh positions, a member or client increases an existing position or creates a new one, a penalty applies, recovered from the clearing member on a T+1 day basis along with pay-in.

Violations and penalties

The compliance lapses that attract penal charges:

• Non-fulfilment of initial margin obligations
• Non-fulfilment of settlement obligation
• Non-fulfilment of securities deliverable obligation
• Non-fulfilment of minimum deposit requirements
• Exposure margin violation
• Position limit violation
• Mis-utilisation of trading member / constituent / client collaterals and deposits
• Violation of exercised positions
• Short or non-reporting of client margin
• MWPL violation

The consequences are severe. The Clearing Corporation may advise the Exchanges to withdraw any or all of the membership rights of the clearing member — including withdrawal of trading facilities of all trading members and clearing facility of custodial participants clearing through him — WITHOUT ANY NOTICE. Outstanding positions may be closed out, and such action is final and binding. The CC can also impose penalties, collect appropriate deposits, invoke bank guarantees or fixed deposit receipts, and realise money by disposing of securities.

Settling the client's running account

To prevent misuse of client funds, SEBI has made it mandatory for brokers to settle the running account of client funds on a monthly or quarterly basis, as per the mandate of the client. The trading member does this after considering the end-of-day obligation of funds across all Exchanges, on dates stipulated by the exchanges — and stock exchanges jointly issue an annual calendar for these settlements at the beginning of the financial year.

One special rule: for clients with a credit balance who have not transacted in the 30 calendar days since their last transaction, the entire credit balance must be returned on the upcoming settlement dates of the MONTHLY running account settlement cycle — irrespective of the cycle the client had chosen. If the client trades again after those 30 days but before those settlement dates, settlement reverts to the client's own quarterly or monthly preference.

The two funds behind the market

Core Settlement Guarantee Fund (Core SGF). Clearing corporations are required to have one. Its primary objective is to have a fund for each segment — Cash, F&O, Currency Derivatives and so on — to guarantee the settlement of trades executed in that segment. If a clearing member fails to honour settlement commitments, the Core SGF is used to fund the obligations of that member and complete the settlement without affecting the normal settlement process.

Investor Protection Fund (IPF). Established by exchanges, with the objective of compensating investors in the event of a defaulting member's assets not being sufficient to meet the admitted claims of investors. Its other objectives include promoting investor education, awareness and research. It is administered by way of a registered Trust.

The distinction to hold: SGF protects the settlement system against a clearing member's failure. IPF compensates investors when a defaulting member's assets fall short.

Recent SEBI measures on index derivatives

Six measures, each with a date:

And an extension of the calendar spread rule to single stocks: by circular dated 5 February 2026, effective 5 May 2026, margin calculations for calendar spread positions remain unchanged for all expiries except contracts expiring on a given day. If monthly expiries fall on the 29th, 30th and 31st, then on the 29th a spread involving the 29th-and-30th, or 29th-and-31st, gets no calendar spread treatment — but a spread involving the 30th and 31st continues to get it.

Cyber Security and Cyber Resilience Framework

SEBI has notified a detailed CSCRF for SEBI Regulated Entities, coming into effect in a phased manner starting from 1 January 2025, superseding existing circulars. Its key objectives: address evolving cyber threats, align with industry standards, encourage efficient audits, and ensure compliance.

The Market Infrastructure Institutions (MIIs) under CSCRF are:

• Stock Exchanges
• Depositories
• Clearing Corporations
• KYC Registration Agencies (KRAs)
• Qualified Registrars and Transfer Agents (QRTAs)

Cyber resilience is an organisation's ability to prepare and respond to a cyber-attack, and to continue operation during, and recover from, a cyber-attack. The framework rests on five cyber resiliency goals:

1. Anticipate — maintain a state of informed preparedness from adversary attacks
2. Withstand — continue essential business functions at times of adversary attacks
3. Contain — localise containment of the crisis and isolate trusted functions from untrusted ones
4. Recover — restore business functions to the maximum extent
5. Evolve — change business functions and supporting cyber capabilities to minimise adverse impacts