CFS Financing Procedure

Brokerage houses provide financing facility to their clients. Incase the demand for financing increases beyond the available resources of the brokerage house, then the brokerage house borrows money from financial institutions through CFS (Continuous Funding System). Under the CFS facility, all financiers and borrowers must register themselves with NCCPL.

Under CFS financing, the non-broker financiers  promise to provide up to Rs.20,000,000. The rate of interest on financing is determined by supply and demand forces. 

In the above example, there are two financiers who offer to provide financing for PSO shares at a rate 15% for 100,000 shares and 15.01% for 200,000 shares. On the bid side, there are two brokers who seek financing for 100,000 shares of PSO at a rate of 14.98%, and 300,000 shares at a rate of 14.95%. When the rate of financing on bid and offer sides match, automatically the transactions will complete.   

For further details on how the trading and settlement work, see the PDF file of NCCPL and go the relevant section that highlights the procedure for CFS financing.