What is Upstreaming and Downstreaming of Funds?

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According to Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/084, dated June 08, 2023, issued by SEBI, a new process has been introduced to enhance the security of customer funds entrusted to Stock Brokers (SB) and Clearing Members (CM). 

This process necessitates the implementation of both Upstreaming and Downstreaming of funds to Clearing Corporations (CC).

Funds Upstreaming

Funds Upstreaming refers to the process of deducting the peak margin and payment obligations from a client's account and then transferring these funds upstream from the Broker's Settlement account to the Clearing Corporation's designated account, known as the Upstream Client Nodal Bank Account (USCNBA). 

This involves debiting of funds from the client's account and subsequently channeling them upstream to the Clearing Corporation on the same day, ensuring compliance with the specified cutoff time.

Funds Downstreaming

Funds Downstreaming refers to the process of receiving any outstanding amounts owed to clients, such as payout obligations or peak margin reversals, from the Clearing Corporations (CC) through the broker's Settlement account into the broker's designated Downstream account. This entails that Clearing Corporations will hold these funds in the broker's Downstream account on T+1 day, following the cutoff time, and clients will subsequently receive these funds from this account on T+1 day, prior to the Market opening.