How are stocks settled after a trading holiday

We normally tend to use the words trading holiday and clearing holiday in the stock markets interchangeably. These are two different things altogether. The trading holiday is the day on which there is no trading permitted. That means you cannot use your trading account to place trades, either offline or online. No buy or sell orders in the stock market are allowed on trading holidays. Obviously, when there is no trading, there is no question of clearing and settlement of trades, hence there would also be no clearing of trades on such days.

However, there are a number of days on which there is trading in the stock market but then clearing is not available due to a bank holiday as stipulated by the RBI. In such cases, the clearing of trades get bunched together, as we will see in detail later in this article. But, let us first understand trading and clearing holidays from a practical perspective.

Trading and clearing holidays for calendar year 2021

The table below captures the NSE list of market holidays with the dates, description and the nature of the holiday.

Data Source: NSE

Find the entire list of Stock Trading Holidays in 2021

The above is a comprehensive list of holidays published by the NSE but remember not all the above days are trading holidays. All the above days are clearing holidays when there will be no clearing done by the banks. We have marked the specific days in red colour in the last column where the particular day is a clearing holiday but not a trading holiday. For example, in the above 2021 list, 19 Feb and 01 April are clearing holidays but are not trading holidays. On these days, stock market trading goes on as usual. However, 05 November and 19 November 2022 are trading-cum-clearing holidays and on these days the stock market trading and bank clearing will be shut.

How is settlement managed when there are trading and clearing holidays?

We are all aware that the trade is not complete with executing the trade. The exchanges and clearing corporations along with the banks and Depositories perform the Clearing and Settlement function. For stock purchases, this entails calculating the Trading Member wise debits, collecting the debit amounts and ensuring that shares are credited to the respective demat accounts on T+2 day. For stock sales, it entails calculating the Trading Member wise credits, ensuring that clean demat delivery is given and the funds are credited to the respective bank accounts on T+2 day.

Now how would the above situation get impacted if there are trading / clearing holidays in between? Let us look at 2 situations.

1)    If there is an intervening trading holiday, then settlement gets postponed accordingly. For example, 21 July is a trading cum clearing holiday. All trades of 19 July will get settled on 22 July instead of 21 July. Similarly, all trades of 20 July will get cleared on 23 July instead of 22 July.

2)    What happens if it is only a clearing holiday. For example, 26 May, Buddha Purnima, was only a clearing holiday. In such cases, settlements would get bunched. So, the trades of 24 May and the trades of 25 May would get bunched and get settled on 27 May.

That is how your clearing and settlement of trades gets impacted by trading and clearing holidays.

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Find the entire list of NSE/BSE Holidays 2021, Commodity Market Holidays