Non-Clearing Member (NCM) is a member of MEX who has the right to introduce clients and registered users in the exchange. As a Member, it can deal on behalf of the clients. All the trades have to be executed only through the Trading facilities provided by the Exchange. NCM will settle the transactions through Clearing Members. NCM is required to maintain a separate account for client transactions and is required to maintain the margin deposit and money belonging to clients in segregated accounts. NCMs are responsible for all the transactions of their clients. NCM will clear their Trades through Clearing Members. A NCM will be allowed to have clearing relationship with one or more CM at any point of time. The obligations of the NCMs are monitored by the associated CM. Breach of rules, Regulation and bye-laws by a NCM, shall not be allowed to do further trading unless the limits are reset on receipt of additional deposits.
To provide continuous liquidity in the market, the NCMs will be acting as Jobbers in the Market. However, there are no special privileges or obligations attached to this function of NCMs. NCMs will compete in the market place along with customers' orders to improve the price discovery in the market. NCMs will make use of the Quote Driven Trading System of the exchange to provide continuous stream of order flows in the market.
The following category of NCM shall be available in membership:
- Institutional Non-Clearing Member
Clearing Member (CM) is a Member of MEX who has the right to execute transactions in the trading system of the exchange. CM also a right to clear the transactions in contracts executed in MEX either on its own behalf or on behalf of other NCMs. CMs will be responsible to MEX for all the obligations (margins, settlement obligations etc) of NCMs on whose behalf they have agreed to clear the trades. MEX will debit the banking account of the CMs for all the obligations of the NCMs who are clearing through CMs. CMs will enter into Clearing Agreements with their constituent Non-Clearing Members. They will also take the required Caution Deposit from the NCMs. They will be allowed to set the limits for trading by NCMs. CMs are required to maintain segregated accounts of the all the monies belonging to NCMs on behalf of whom they are clearing the trades. If the clearing limits of CMs are breached, all the Non-Clearing Members attached to them will be stopped from further trading until the limits are reset on receipt of additional deposits.
The number of CMs will be limited compared to that of NCMs in MEX. CMs will be located in major towns and have banking accounts with the Designated Clearing Banks who have interface with MEX
All Clearing Members as the Market Maker
A market maker is a person or a firm who quotes both a buy and a sell price in a traded instrument or commodity, hoping to make a profit on the turn or the bid/offer spread
In trading, where most deals are conducted through MEX and the market maker sells to and buys from its clients. Hence, the client's profit is the company's loss and vice versa.
All CMs are Market Makers, but some just provide a portal or access point to these Market Makers making them plain.
When trading contracts Member becomes the market maker by creating a Market. This ensures that all of Buy/Sell orders are guaranteed at the requested price, theoretically creating infinite liquidity. While high liquidity is one of the large benefits of CFDs it does come at a price, The Spread. Client cannot move CFDs between Members, transfer them from funds to trusts or even to other people as they are a contract between client and its Member and that contract says that client can only sell that CFD back to the Member which purchased it from.
This gives Members the enormous power of spread control. In the nature of turning a profit for the Members as smaller (tighter) spreads attract more customers, which in turn earn the Member more.