Ccil12

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Ccil12

  1. 1. (CCIL)
  2. 2. <ul><li>The Clearing Corporation of India Ltd. (CCIL) was set up in April, 2001 for providing exclusive clearing and settlement for transactions in Money, Govt.sec. and Foreign Exchange. </li></ul><ul><li>The company commenced operations on February 15, 2002 when the Negotiated </li></ul><ul><li>Dealing System (NDS) of RBI went live. </li></ul><ul><li>CCIL started providing the settlement of forex transactions since November 2002. </li></ul><ul><li>CCIL launched the Collateralised Borrowing and Lending Obligation (CBLO) in </li></ul><ul><li>January 2003, a money market product based on Gilts as collaterals. It has </li></ul><ul><li>developed a forex trading platform “FX-CLEAR” which went live on August 7, </li></ul><ul><li>2003. </li></ul><ul><li>CCIL has started the settlement of cross-currency deals through the CLS Bank from </li></ul><ul><li>April 6, 2005. At the request of RBI, CCIL developed and currently manages the NDS- </li></ul><ul><li>OM and NDS-CALL electronic trading platforms for trading in the government </li></ul><ul><li>securities and call money. It has also developed the NDS-Auction module for Treasury </li></ul><ul><li>Bills auction by RBI. </li></ul>
  3. 3. <ul><li>1 . Improve efficiency in the transaction settlement process </li></ul><ul><li>2.Insulate the financial system from shocks emanating from operations related issues </li></ul><ul><li>3. To undertake other related activities that would help to broaden and deepen the money, debt and forex markets in </li></ul><ul><li>the country. </li></ul>
  4. 4. Securities settlement Introduction <ul><li>The transactions relating to government securities are settled through </li></ul><ul><li>member’s SGL/current a/c at RBI, with settlement of funds </li></ul><ul><li>on a net basis and that of securities on a gross, or trade by trade basis. </li></ul><ul><li>CCIL guarantees settlement of trades on the settlement date by becoming a central counter- party to every trade through the process of novation </li></ul>
  5. 5. BENEFITS <ul><li>The benefits of settling trades through CCIL are as under:  </li></ul><ul><li>Assurance of settlement on the settlement date. </li></ul><ul><li>Reduction in counterparty exposure. (the exposure is extinguished upon acceptance of trades for settlement). </li></ul><ul><li>Operational efficiency Improved liquidity and better leveraging (e.g., shorter holding periods for government securities). </li></ul><ul><li>Lower operational cost, overall. </li></ul>
  6. 6. CBLO INTRODUCTION Collateralized Borrowing and Lending Obligation (CBLO), a money market instrument as approved by RBI, is a product developed by CCIL.   An obligation by the borrower to return the money borrowed, at a specified future date; An authority to the lender to receive money lent, at a specified future date with an option/privilege to transfer the authority to another person for value received;  An underlying charge on securities held in custody (with CCIL) for the amount borrowed/lent. 
  7. 7. Membership & Eligible securities <ul><li>Membership to CBLO segment is extended to entities who are RBI- NDS members viz. Nationalized Banks, Private Banks, Foreign Banks, Co-operative Banks, Financial Institutions, Insurance Companies, Mutual Funds, Primary Dealers etc. </li></ul><ul><li>Associate Membership to CBLO segment is extended to entities who are not members of RBI- NDS viz. Co-operative Banks, MutualFunds,Insurance companies, NBFC's, Corporate, Provident/Pension Funds etc. </li></ul><ul><li>Eligible securities are Central Government securities including Treasury Bills, as specified by CCIL from time </li></ul>
  8. 8. Collateral and margin Introduction CCIL manages its risk exposure vis-à-vis its members through a comprehensive risk management process. Upon admission and completion of membership documentation formalities, prior to activation of their membership, all Members are required to contribute their margin requirements as required for each business segment to which they have been admitted. Member margin contributions in respect of CCIL’s various business segments are received, maintained and administered in terms of the provisions of its Bye Laws, Rules and Regulations .
  9. 9. Members of CCIL’s Securities Segment are required to deposit their margin contributions into CCIL’s Settlement Guarantee Fund (SGF) maintained for this business segment SGF is received in the form of both cash and securities. SGF cash contributions are received in CCIL’s Current Account maintained with Reserve Bank of India Mumbai. SGF security contributions are received and maintained in CCIL’s Constituent SGL (CSGL) Account maintained with Reserve Bank of India, Mumbai SGF For Securities Settlement
  10. 10. Composition <ul><li>SGF is received in the form of cash and securities. Members are required to maintain a minimum of 10% of their total margin requirements in the form of cash contributions to SGF. </li></ul><ul><li>Members have the option to maintain their entire SGF contribution in the form of Cash. </li></ul><ul><li>The balance SGF contribution can be held in the form of specified GOI dated securities and/or Treasury Bills from amongst a list of eligible securities notified by CCIL from time to time. </li></ul><ul><li>Members of CCIL’s Securities Segment are currently required to maintain a ratio of 1:9 in respect of their cash: securities . </li></ul>
  11. 11. <ul><li>Work Process </li></ul><ul><ul><li>SGF - Cash </li></ul></ul><ul><li>Members desirous of making cash contributions to their SGF are required to intimate CCIL about the same using a prescribed format. </li></ul><ul><li>Cash contributions from members are received by means of their cheques drawn on their Current Account with Reserve Bank of India, Mumbai. </li></ul><ul><li>Member SGF balances are updated by CCIL upon receipt of relative funds into its Current Account with RBI. </li></ul>
  12. 12. <ul><li>SGF – Securities </li></ul><ul><li>All transfers of securities to and/or from CCIL by its members are carried out on a “Value Free of Payment” basis. </li></ul><ul><li>Members desirous of making securities contributions to their SGF are required to notify CCIL about the same using a prescribed format. Security contributions are received and maintained in a separate CSGL Account with RBI. SGF security contributions are made from among the list of specified securities eligible for margin contributions. The list of Eligible Securities is decided by Risk Management Department. </li></ul><ul><li>Deposit of Securities by Members into SGF is carried out electronically using the Value Free Transfer functionality in RBI’s Negotiated Dealing System (NDS). </li></ul><ul><li>A securities transfer request is created and approved by the member. The same is confirmed by CCIL and forwarded to RBI for authorization and settlement. Members have to ensure adherence to cut off timings prescribed by RBI for the purpose. </li></ul>
  13. 13. <ul><li>Corporate Actions and Benefits </li></ul><ul><li>All corporate actions on member SGF holdings are serviced through the electronic funds transfer mechanism of Reserve Bank of India. Relative funds are remitted to the Current Accounts of concerned members with separate individual electronic advices to members </li></ul><ul><li>SGF – Cash – Interest Payment </li></ul><ul><li>Members are not entitled to any interest on their cash contributions to SGF, which is expected to be at least 10% of their total margin requirement </li></ul><ul><li>SGF – Securities – Interest Payment </li></ul><ul><li>Periodic coupon payments received in respect of Members’ SGF security contributions (held in the form of dated securities) are passed on to concerned Members by CCIL immediately upon receipt of relative interest from Reserve Bank of India. </li></ul><ul><li>SGF – Securities – Redemptions </li></ul><ul><li>Redemption proceeds of matured securities are treated as concerned members’ additional cash contribution to SGF. </li></ul>
  14. 14. List of Eligible Securities CCIL prescribes a list of securities that are eligible for margin contributions by members to their SGF. This list is periodically reviewed based on trading volumes, tenor, market volatility etc. CCIL values member security holdings in SGF at prescribed intervals and/or at every instance of SGF deposit/withdrawal by a member .
  15. 16. <ul><li>Every eligible foreign exchange contract, entered into between members, will get novated and be replaced by two new contracts - between CCIL and each of the two parties, respectively. Deal confirmation files will be transmitted over the INFINET to CCIL, and will form the starting point for processing by it. Following the multilateral netting procedure, the net amount payable to, or receivable from, CCIL in each currency will be arrived at, member-wise. The Rupee leg will be settled through the members' current accounts with RBI and the USD leg through CCIL's account with the Settlement Bank at New York. </li></ul>
  16. 17. <ul><li>Assurance of settlement on the settlement date </li></ul><ul><li>Reduction in counterparty exposure. (In case of government securities, the exposure will get extinguished upon acceptance of trades for settlement; in forex clearing & settlement, since a Loss Allocation Procedure is stipulated, the exposure will not get extinguished but will come down from the gross level to the net level.) </li></ul><ul><li>Operational efficiency </li></ul><ul><li>Easier reconciliation of accounts (in case of forex trades) </li></ul><ul><li>Improved liquidity and better leveraging (e.g., shorter holding periods for government securities) </li></ul><ul><li>Lower operational cost, overall </li></ul>
  17. 18. <ul><li>CCIL runs a multilateral netting system for forex inter-bank transactions that nets the members payments and receipts in a currency, though they are due to or from different counterparties and settles the net position in both the legs of the transactions. The matched and accepted Forward deals are guaranteed for settlement from S-2 day and the Spot, Tom, Cash deals are guaranteed for settlement from the trade date as the CCIL becomes the central counterparty to every accepted trade through the process of novation. </li></ul><ul><li>CCIL has commenced settlement of forex operations for inter-bank USD/INR spot and forward trades from 08th November, 2002 onwards, and for interbank USD/INR cash and tom trades from 5th February, 2004 </li></ul>
  18. 20. <ul><li>CCIL has developed  FX-CLEAR, a Forex Dealing  System, which  has been  launched on August 7, 2003 . FX-CLEAR offers both Order Matching and Negotiation Modes for dealing. The FX-CLEAR covers the inter-bank US Dollar-Indian Rupee (USD- INR) Spot and Swap transactions and transactions in major cross currencies (EUR/USD, USD/JPY, GBP/USD etc.)  The USD-INR constitutes about 85% of the transactions of the total Forex transactions in India in terms of value. </li></ul>
  19. 21. <ul><li>Reducing the cost of forex transactions in India by providing cost-efficient trading terminals. </li></ul><ul><li>Offering enhanced value added trading features to meet the real needs of market relating to forex transactions. </li></ul><ul><li>Enhancing the depth of the market through wider participation of banks. </li></ul><ul><li>CCIL will provide STP (Straight Through processing) for all trades in USD-INR done on FX-CLEAR . </li></ul><ul><li>Reducing the counter-party and default risk by ensuring suitable settlement mechanism. </li></ul><ul><li>By using the CCIL’s FX-CLEAR, the Members will have the advantages of CCIL’s institutional structure and standing, the Straight-Through Processing (STP) facility, cost efficient Forex Dealing, automatic Price discovery in addition to other qualitative benefits . </li></ul>
  20. 22. Risk management process <ul><li>In relation to securities segment – CCIL process are designed to cover the market risk through its margining process . It collects initial margin and mark to margin from members in respect of their outstanding trades .mark to market margin is difference between current market price and contract price of securities covered by trade. Initial margin is to cover the likely risk from future adverse movement of prices of concerned securities. </li></ul><ul><li>Collateralized borrowing and lending obligation segment process is managed by setting borrowing limits for members , all borrowings are fully collateralized. CCIL should have enough security to meet any eventuality of a default by borrower . </li></ul>
  21. 23. <ul><li>Forex segment – forex settlement operation stipulates fixing of net debit cap for each member . NDC arrived at based on two factors – counter party risk assessment grading . Based on CPRA margin factor is arrived. NDC is maximum limit up to which CCIL can take exposure on a member for a settlement date in terms of net US dollar sale position . </li></ul><ul><li>CLS segment – CCIL’s settlement of CLS trades for its members by becoming a third party settlement agency to ABN-AMRO as a settlement banks. As a settlement agency , CCIL do not take any clean exposure on its members . Risk is covered through collateral or bank guarantees. </li></ul>

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