What’s the max amount we can claim from IPF in case of broker default?
NSE says its 35L
https://www.mcxindia.com/Investor-Services/defaulters/investors-protection-fund-overview
MCX says its 25L
It’s actually quite simple, NSE and MCX are completely independent, and each has its own Investor Protection Fund. That’s why the maximum compensation limits can be different for each. and for NSE, the limit was recently increased from ₹25 lakh to ₹35 lakh. Does that make sense?
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So in case if Zerodha defaults, we have the liberty to make a claim from either of the exchanges?
Also, does BSE has separate IPF Fund?
The IPF charges which gets debited from our account, to whcih fund does it gets routed to?
Nope, you can only claim from the IPF of the exchange where your trade happened Even if Zerodha is a member of multiple exchanges, each claim is specific to the exchange. You can’t claim from NSE IPF for an MCX trade, or vice versa…
does BSE has separate IPF Fund?
Yup…
The IPF charges which gets debited from our account, to which fund does it gets routed to?
The small IPF fee deducted when you place a trade goes directly to the IPF of the exchange where you traded. In other words, the fund you’re contributing to is the same one you’d claim from if something goes wrong on that exchange, kind of like how an LIC policy works.
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Say I have 50L cash maintained with Zerodha and havent taken any trades. In that case, whcih exchange should I approach?
That cash sits with Zerodha as a trading member / broker, not directly with NSE, BSE, or MCX. IPF of exchanges (NSE, BSE, MCX) is meant to compensate for trades done on that exchange. Since you didn’t trade, there is no exchange-specific claim to make, AFAIK.
However, this doesn’t mean your funds are completely unprotected.
Broker’s Liquidation: If the brokerage firm is declared a defaulter, a court-appointed liquidator takes control of its assets, including the “Client Pool Account” where your money is held.
Reconciliation of Claims: All clients, whether they have traded or not, would need to file a claim with the liquidator. The liquidator would then reconcile the claims with the available funds. If there is a shortfall in the client pool account, meaning the broker used client funds for their own purposes, the exchanges’ IPFs would come into play. While the primary purpose is for trade-related losses, the IPF can also be used to cover shortfalls in a broker’s overall client accounts. This is where the compensation limits (₹35 lakh on NSE, ₹15 lakh on BSE) would apply to ensure clients receive a basic level of protection. The exchanges and the liquidator will determine the extent of the shortfall and which exchange’s IPF is responsible for covering it. It is likely that both exchanges will be involved.
NOTE: you are not protected for the full amount. The investor protection system in India is designed to protect a certain level of loss, but not necessarily the entire amount for very large sums.
To dive deeper, check this out.
I dont think so this is the case. If not for broker defaults, what would IPF cover? Trades gone wrong? @siva @nithin
What happens to the funds and holdings if a stockbroker defaults?.
My only question is, From NSE it is insured upto 35L (Zerodha needs to update the FAQ) and from BSE it is 15L
If I maintiain 50L with a broker and in case he defaults (Consider he’s a trading member with both NSE and BSE), will I be able to claim 35L from NSE and 15L from BSE? @nithin @siva
there are basically two side to what it cover, one is the defaulting member’s client funds (sorry, I was kinda vague last time), and other is the settlement obligation which that member didn’t meet before default, like not delivering securities or not passing payout that was due to client.
Ahh, now I see where the confusion lies.
SEBI’s framework mandates that all client funds received by stock brokers must be transferred (“upstreamed”) to a Clearing Corporation (CC) at the end of each trading day. Brokers cannot retain client funds beyond the end of the day; these must be upstreamed to the CC. a broker who is a member of multiple clearing corporations can upstream the pooled client funds to any one of those CCs each trading day:
- At the end of day, 100% of client funds must be upstreamed to a CC.
- The broker can choose which CC (NSE or BSE) to upstream to, if it is a member of both.
- Once upstreamed, those funds are considered “mapped” to that CC for the day and any default protection/coverage (like IPF) would flow from that CC.
- The same rupee can’t be split or double-counted across two CCs at once.
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Thanks much! This clarifies all!
The reason why I asked these questions is because Flattrade is mandating 50:50 cash-collateral ratio, quoting that they are dependednt on treasury income for offering free brokerage!
They are now asking us to maintain 50% in cash and 50% in colateral and they are not considering Liquid fund as cash, which was the case up untill now. I believe none of the the other brokers are enforcing this. So kinda worried to keep huge cash with them.
Now I have to figure out which CC are they upstreaming the funds to.
True peace lies in partnering with high networth brokers, i value stability & trust over foolish discounts.
