In a significant movement to improve the execution of the best price for investors and align with global practices, the exchanges of Indian values and compensation corporations are established to implement a unified contract notes system from May 2025. This change makes the state and consolidated price of SINGE execute in multiple places, leveling the playing field for both exchanges.
What is a contract note and why is it important?
A note of the contract is a legal document issued by runners to investors, summarizing all operations executed on a negotiation day. It includes details such as security name, quantity, commercial price, time, brokerage charges and application taxes. Serving as official commercial execution evidence, it is essential for the maintenance of records and fiscal effects. Currently, if an investor divides operations between the two exchanges, NSE and BSE, they receive separate contract notes of each, which shows its own average price weighted by volume (VWAP) for the same order.
What are the problems with the separate contract notes?
Receiving two contract notes separated by exchange with different VWAPS adds to the costs of investors and operational loads, or overcoming the benefits of better prices in another exchange. Direct costs include transaction charges or ticket sales costs, which is a fixed expense even for a single operation in another place of exchange. The separate notes also lead to operational inefficiencies, such as the generation of multiple lines for numerous orders, failures in coincident orders and additional paperwork. Foreign portfolio investors (FPI) require additional investments in technology and exclusive processes in India, since a common contract note is the global standard. To avoid this additional cost and operational hauses, many FPI prefer trade through a single stock exchange, creating an unequal playing field between the two exchanges.
What are the benefits of a common contract note?
A common contract note allows investors, partly FPIS, to become the exchange -agnostic and trade at the best available price. Once implemented, runners and custodians can trust smart orders routing tools (SOR) to ensure that orders coincide with the best price, regardless of the place of exchange. A single note will provide a VWAP consolidated for safety in all exchanges for operations executed a liquidation cycle, minimizing the pricing and rounding errors. For the exchanges of values, this movement eliminates the disadvantages created by the documentation process, which allows them to compete fairly depending on the liquuidity and the prices available. Currently, the volumes are more biased towards NSE, but they could extend evenly through exchanges, increasingly benefiting the EEB, according to some FPI. It would also improve interoperability between the exchanges of values.
How is the common contract note implemented and what changes are required?
The deployment in the phases is expected to be focused on cash operations, followed by the futures and options segment (F&P). To prepare the market ecosystem, runners, their rear offices, STP suppliers, compensation corporations and custodians are making the necessary changes to the system. For example, the systems are being updated to recognize operations without stamping them to a specific exchange. Customers will experience more automated orders, which require less operations to be registered and assigned. To prove market preparation, compensation houses have carried out demonstration tests from April 7 to 23. Until now, 10 rounds of user acceptance tests (UAT) of the entire market have completed the legs in coordination with all market infrastructure institutions (MII). Around ten custodians in the general houses have confirmed the preparation of their system, and around ten runners with ICCL have participated in all the tests of tests. Another live drill is planned for the entire market for Saturday, April 26. Sebi has also made web seminars with FPI to explain technicalities and the next changes.
Posted on April 26, 2025