Investors will soon be able to get a common contract note for the trades done on exchanges, as bourses, clearing corporations and broking firms have begun testing the systems with the aim of rolling out the feature in the current quarter itself, Moneycontrol has learnt.
The contract note is an important document and a proof of execution of trades done through a broker. In case a broker defaults, investors can get compensation from the Investor Protection Fund by submitting the contract note as the proof of transaction.
Exchanges have already put systems in place, and are testing the framework with select broking firms, conducting mock tests with their clearing and settlement arms.
“As part of the implementation roadmap and to ensure smooth transition CCs (clearing corporations) have collectively initiated a dedicated environment to enable market participants to participate in the interface testing with effect from 7th to 23rd April,” a circular issued by NSE Clearing Ltd (NCL) said.
BSE’s clearing arm, ICCL too has issued a similar circular.
According to people familiar with the development, the facility is expected to be implemented in the current quarter, provided the tests - involving all the broking firms - progress smoothly.
While the common contract note will be mandatory for all categories of clients of equity and derivatives segment, it will only be applicable for secondary market transactions.
The common contract note will be a useful document for clients, as it will give them details regarding the single Weighted Average Price, or WAP, for all the transactions in a specific share across stock exchanges. Simply put, it will help investors better understand the average buying or selling price of the share.
Weighted Average Price across exchanges is determined by dividing the cumulative value of the shares traded across exchanges with the total number of shares bought or sold across exchanges.
Though brokers will give exchange-wise price and other details separately as annexures, exchange transaction charges shall be provided on a combined basis in the revised contract note format.
Further, the common contract notes will also include details like order & trade number, order time stamp, details of the securities - quantity, price - along with the various charges, and net amount to be paid or received in case of multiple transactions.
The proposal of a common contract note with weighted average price across exchanges is long pending due to issues related to the readiness of market participants.
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