Clearing Corporations

Sebi extends deadline to Dec 31 for comments on clearing corps' ownership

Markets regulator Sebi on Friday extended the timeline till December 31 to submit public comments on a proposal of diversifying ownership of clearing corporations, which are at present fully owned by stock exchanges. Sebi floated a consultation paper on the review of ownership and economic structure of clearing corporations (CCs) on November 22 and sought comments on the same by December 13. "Based on the representations received by Sebi from some of the entities/organisations, it has been decided to extend the timeline to submit the public comments on the consultation paper till December 31, 2024," the regulator said in a statement. In its consultation paper, Sebi proposed diversifying and widening the ownership of the clearing corporations, which are at present wholly-owned subsidiaries of stock exchanges. Sebi rules prohibit CCs from listing publicly but allow stock exchanges (their parent entities) to list, indirectly exposing CCs to market pressures. "While looking to broad b

Sebi proposes more diversified ownership of equity clearing corporations

A clearing corporation is responsible for the confirmation, settlement and delivery of trades

European banks to continue dealing with Indian clearing firms post October

Europe's authorities set the deadline last year after their request for co-supervision of European trades settled through Indian clearing houses was denied by the Reserve Bank of India

Sebi issues consultation paper on Clearing Corp's interest income treatment

Markets regulator Sebi has issued a consultation paper on the treatment of interest income earned by the clearing corporations from cash collaterals from clearing members and upstreamed client funds. Sebi had previously mandated the upstreaming of all client funds to Clearing Corporations (CCs) at the end of the day, allowing these funds to be upstreamed only in the form of cash, fixed deposit liens, or mutual fund overnight scheme pledges. In its consultation paper, the regulator noted that clearing corporations have been holding substantial cash collaterals from Clearing members (CMs) towards settlement obligations and margin money, investing or deploying these funds to earn interest or income. However, the collaterals held by CCs, are not owned by them and are instead held in a fiduciary capacity as per regulatory requirements. To review the existing practice of interest or income earned by CCs on the cash collaterals received from CMs and upstreamed clients' funds, the matter w

Sebi issues guidelines for system audit of professional clearing members

Markets regulator Sebi on Thursday put in place the framework for system audit of professional clearing members (PCMs), directing them to submit information with regard to major and minor non-compliances in such system. The framework will come into force with immediate effect and the first audit will be conducted for FY24, Securities and Exchange Board of India (Sebi) said in a circular. All clearing corporations (CCs) have been directed to jointly establish a uniform penalty structure for PCMs to ensure timely submission of system audit reports and closure of audit observations. In its circular, Sebi said the audit of PCMs will be conducted according to the norms, terms of reference (TOR) and guidelines issued by Sebi or clearing corporations (CCs). They will select the auditors based on the prescribed auditor selection norms and TOR and the governing board of the PCMs will approve the appointment of the auditors. An auditor can perform a maximum of three successive audits. Howe

Sebi forms panel to review ownership, economic structure of clearing corps

Capital markets regulator Sebi on Tuesday said it has set up a committee to review the ownership and economic structure of clearing corporations and suggest measures to ensure that clearing corporations function as resilient, independent, and neutral risk managers. The ad-hoc committee would be chaired by Usha Thorat, former Deputy Governor of the Reserve Bank of India (RBI). The decision has been taken in the wake of the substantial growth of Indian securities markets in recent years and the importance of clearing corporations as central risk management institutions. In a statement, Sebi said that the committee has been entrusted with the task of reviewing ownership structure as well as finances of clearing corporations. With regards to ownership structure, the committee will examine the feasibility, and broadening the list of eligible investors, who are allowed to take shareholding in a clearing corporation and suggest categories of investors who can acquire stakes in such ...

Sebi tweaks framework for clearing firms on liquid assets as collateral

Capital markets regulator Sebi has tweaked guidelines for accepting liquid assets as collateral by clearing corporations (CCs) and put in place prudential norms for exposure of such entities in a bid to strengthen the risk management framework. Clearing corporations accept liquid assets with applicable haircuts to meet the requirements for initial margins and mark to market losses among others. In its circular, the regulator said that units of growth plan of overnight mutual fund schemes would be accepted as cash equivalent by CCs with a haircut of 5 percent and for other plans of overnight mutual fund schemes, the hair cut of 10 percent would continue to be applicable. Overnight mutual funds invest only in overnight securities having maturity of one day. Further, equity shares with impact cost of up to 0.1 percent for an order value of Rs 1 lakh and traded for 99 percent of days over the period of previous six months would be accepted as part of other liquid assets, it said. "In

Indian firms took on larger forex risk in 2023 counting on RBI support

"For us, the drop (in forward hedging) has been bigger, more in the vicinity of 20% to 25%," a senior FX salesperson at a private bank said

Sebi introduces SaaS model for clearing corps to boost business continuity

To strengthen the business continuity framework of clearing corporations for handling major software malfunctions, Sebi on Wednesday asked them to establish their critical Risk Management Systems (RMS) using a software-as-a-service (SaaS) model. RMS plays an important role in ensuring smooth and uninterrupted functioning of the securities market by carrying out online real-time risk management of trades happening on stock exchanges. Non-availability of RMS poses a major risk to the continuity of trading on stock exchanges. In the first phase, systems would be designed to provide an additional tool for business continuity in case of issues with RMS of clearing corporations, Sebi said in a circular. "In order to further manage disruptions impacting availability of RMS, it is proposed to have another contingency measure in place under Software as a Service (SaaS) model," Sebi said. The framework in the first phase would operate for existing interoperable segments of CCs -- cash marke

Sebi mandates periodic PFMIs assessment for depositories, clearing corps

Markets regulator Sebi on Tuesday asked depositories and clearing corporations to carry out self-assessment with respect to Principles for Financial Market Infrastructures (PFMIs) on a periodic basis. The issue of assessment of PFMI by Sebi-regulated FMIs (Financial Market Infrastructures) was discussed at the regulator's secondary market advisory committee, according to a circular. Based on the recommendations of the committee, Sebi said it has been "decided that FMIs shall carry out self-assessment on a periodic basis against the PFMIs and disclose the same on their websites". In this regard, the 24 principles for FMIs have been classified as "quantitative" and "qualitative". FMIs regulated by Sebi are depositories and clearing corporations. According to the circular, FMIs should be monitored and assessed against the PFMIs on annual basis by the Regulatory Oversight Committee (ROC) of the FMI. ROC should submit a report to the governing board of the FMI and Sebi within 60 days

Sebi tweaks rule on upstreaming clients' funds by brokers to clearing corps

To promote ease of doing business, capital markets regulator Sebi on Tuesday tweaked the framework requiring stock brokers or clearing members to upstream clients' funds to clearing corporations. This came after Sebi received representations from various stakeholders -- stock brokers, and brokers' associations citing certain operational difficulties in implementation of the framework. Addressing the issue, Sebi said that stock brokers (SBs) or clearing members (CMs) will upstream all the clients' clear credit balances to clearing corporations (CCs) on the End of Day (EOD) basis. Such upstreaming will be done only in the form of either cash, lien on Fixed Deposit Receipts (FDRs) created out of clients' funds, or pledge of units of Mutual Fund Overnight Schemes (MFOS) created out of clients' funds. Stock brokers are required to maintain designated client bank account to receive funds from their clients. The nomenclature of all such accounts will be changed to either of the two ...

RBI, Bank of England sign agreement to exchange information on CCIL

The MoU also demonstrates the importance of cross-border cooperation to facilitate international clearing activities and the BoE's commitment to deference to other regulators' regimes

Sebi eases norms for borrowing for large corporates through debt securities

Capital markets regulator Sebi on Thursday relaxed norms for borrowings through the issuance of debt securities large corporates to meet their financing needs. Under the rule, entities qualified as large corporates are required to meet 25 per cent mandatory borrowing from bonds. Large corporates are those that have an outstanding long-term borrowing of at least Rs 100 crore with a credit rating of 'AA and above' and have their debt securities listed on a stock exchange. Under the new framework, Sebi has introduced incentives for large corporates in case of surplus in the requisite borrowings and moderated disincentives if they fail to raise at least 25 per cent of their incremental borrowings through debt securities. In case of shortfall or surplus by way of issuance of debt securities, additional or lower contributions, respectively, to the core Settlement Guarantee Fund (SGF) of the Limited Purpose Clearing Corporation (LPCC) needs to be made by the LC, according to the ...

Sebi to tweak 'fit & proper' regime for bourses, clearing corporations

Segregation between individuals and entity; At present, disqualification of a key person could have bearing on the stock exchange's or clearing corporation's status

Sebi launches ASBA-like facility for secondary market to secure investor

With an aim to safeguard investors' money from misuse and default by stock brokers, Sebi on Monday introduced a supplementary process for trading in the secondary market based on blocked funds in an investor's bank account, instead of transferring them upfront to the trading member. This is similar to Application Supported by Blocked Amount (ASBA)-like facility already available for the primary market which ensures that money from an investor gets moved only when an allotment happens. The new facility will become live by January 1, 2024, the Securities and Exchange Board of India (Sebi) said in a circular. Under the framework, funds will remain in the account of client but will be blocked in favour of the Clearing Corporation (CC) till the expiry date of the block mandate or till block is released by the CC, or debit of the block towards obligations arising out of the trading activity of the client, whichever is earlier. Further, settlement for funds and securities will be done by

Tightening the grip: Sebi's daily transfer diktat to further pinch brokers

In a new paper, Sebi has proposed the daily transfer of client funds to clearing corporations

Bank of England in talks to defer deadline for CCIL de-recognition

ESMA under pressure after de-recognising in October six Indian clearinghouses including the CCIL

Foreign banks rush to find plan B as ESMA-BoE ban on CCIL looms

Foreign lenders, RBI in talks to find satisfactory alternative mechanisms

Sebi penalises clearing corporations for violations in Karvy Broking case

The broking firm had misused securities from clients through unauthorised pledging which were used to raise funds from several banks

Sebi issues guidelines for winding down of clearing corporations

Rules will apply when a clearing corporation strategically wants to wind down, or has incurred losses or there is some regulatory action against it