Custodial Participant code (CP code)

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NRIs are permitted to trade in equity derivatives segment in India stock markets. For NRIs to trade in F&O, they have to open an account with Custodial and get a CP Code from them. An NRI trader has to clear all the equity derivative trades through a clearing member using the CP code.

CP code is used by the stock broker to execute the derivatives trades on behalf of an NRI customer. When a CP code is used, the trade obligations including payment of margin and settlement go to the Clearing Member/Custodial and not to the NRI customer.

Custodians are SEBI registered member of clearing corporation. They help the customer in getting the CP code and later clear the F&O trades at the exchange on the behalf of the customer.

All the funds for trading in F&O remain with the custodian. This is similar to how the funds for NRI delivery trading remain with the bank and given to the broker once they share the contact note with bank/custodian at the end of the trading day.

When you open a custodial account, the company offering custodial services usually demands at least Rs 25 lakhs custody portfolio size. This includes cash, stocks or any other security that you deposit with the custodian.

Here are the key points to note about NRI F&O trading:

• CP code is required for Equity F&O trading by NRI
• NRO bank account can only be used for trading in F&O.
• NRE bank account can't be used for F&O trading.
• Each broker has a preferred 3rd party Custodial i.e. Zerodha has ORBIS
• All funds for trading in F&O remains with the custodian.
• Broker does end of day settlement with the custodian.
• One and only one CP code is allowed per NRI investor at a time.
• Custodian charges a clearing fee of Rs 200 to Rs 300 per crore over and above the brokerage charged by the broker.