The Indian investment market is huge, and countless transactions take place every day. There are various regulations and instructions guiding and monitoring the operations of different investment tools. A low-risk level is a major concern for investors and makes a noticeable impact on investment decisions. As far as government securities are concerned, sovereign backing ensures there is low risk of default, keeping investors worry-free. That said, a specific entity tasked with assuring guaranteed settlement makes the market more transparent and reliable.
The introduction of the Clearing Corporation of India Limited, CCIL, is an initiative towards the same. It has taken diverse roles throughout its journey for the betterment of the financial market. Join us as we go through a detailed overview of the Clearing Corporation of India Limited, understand its objectives, learn about the services it offers, and unfold its positive impacts.
Establishment of Clearing Corporation of India Limited & Journey So Far!
In April 2001, the Clearing Corporation of India Limited was set up as a reliable entity to clear and settle transactions in government securities, money markets, and foreign exchange in the country. Its scope of settlement has been progressively broadened to encompass the foreign exchange and over-the-counter (OTC) derivatives markets. By 2014, CCIL received recognition as a Qualified Central Counterparty or QCCP from the Reserve Bank of India (RBI).
CCIL has effortlessly adjusted to the changing dynamics of the financial industry, taking up multiple responsibilities.
CCIL Segments
CCIL covers the following segments.
- Securities & Money Market Settlement
- Forex Settlement
- Derivatives Settlement
Primary Objective of Clearing Corporation of India Limited
Here are the vision and mission driving CCIL and all its operations!
- It aims to be compliant and resilient, providing secure and innovative financial products efficiently and cost-effectively.
- It promises to boost efficiency, safety, and systemic and financial stability through advanced technology, strong risk management, and international standard practices.
- It advocates for research, innovation, and collaborative thinking to shape a promising future in the financial markets.
Services Offered by Clearing Corporation of India Limited
CCIL performs many tasks through its core structure and subsidiaries. The services it offers can be categorized into the following 5 sections.
Clearing & Settlement
CCIL’s clearing and settlement services are divided into two parts. In addition to the Central Counterparty (CCP) settlement
-
Collateral Management
The prime focus of CCIL is to offer guarantee transaction clearings and settlements in the government securities, money, foreign exchange, and derivatives markets. It started Central Counterparty or CCP settlement for its Securities Segment, Settlement Guarantee Fund or SGF to facilitate its Securities Segment and Forex Settlement Segment, and 6 more default funds. The collateral operations are executed under the RBI’s CSGL Guidelines, notifications, and directives, along with the bylaws, rules, and regulations of CCIL to maintain efficiency and transparency.
-
Risk Management
CCIL, as a central counterparty, has a crucial role in risk mitigation in India’s OTC markets. It has introduced various risk management practices to completely eliminate the counterparty failure risk or reduce it to the lowest level.
Enlisted below are the 6 types of risk management processes drafted by CCIL.
- Securities Settlement Process
- Triparty Repo
- USD/INR Process
- Forex Forward Process
- CLS Process
- Rupee Derivative Process
The procedures for handling default cases are based on bylaws, rules, and regulations. Semi-annual drills on default handling are conducted by CCIL to increase awareness and efficiency. All the risk management policies and practices are benchmarked to global standards and reviewed on a regular basis.
Trade Repository
CCIL offers trade Repository services for the following.
-
Rate Derivatives
CCIL started offering trade repository services in August 2007 as per RBI guidelines. It uses data on Rupee denominated Interest rate Swaps reported by market makers, like primary dealers and banks. CCIL further covers reported post-trade processing of trades, which includes cash flow settlement. Transactions concluded with clients started getting reported in 2013, and Interbank and Client Transactions made in Interest Rate Option and Swaption in 2019.
-
Credit Derivatives
RBI permitted trades in Credit Default Swaps (CDS) for market participants in December 2011 and made it compulsory for the market makers to report the data to CCIL.
-
Forex Derivatives
In July 2012, reporting of OTC foreign currency transactions was started off and completed in 4 phases by December 2013. CCIL receives all reports from authorized dealers (Category I) on transactions made among themselves.
The reports on data allow the centralization of all information and open access to the same.
Portfolio Compression Services
Portfolio compression services allow market makers to have two-way positions where they can terminate a portion of their remaining trades in OTC derivative markets prior to original termination dates.
Data Services
The Clearing Corporation of India Limited offers data services for settlement activities and reporting platforms in the government securities, money, forex, and derivatives markets. It also provides value-added data services on internally developed products.
SARVAM
The Service for Analysis of Risk, Valuation, and Margining or SARVAM by CCIL is designed to provide valuation, margining, collateral management, margin maintenance, and risk analytics services.
Impact of Clearing Corporation of India Limited on India’s Financial Market
Here is how the establishment of the Clearing Corporation of India Limited has impacted the final markets.
- Improved Efficiency: The efficiency in settlements of market transactions has increased by the presence of a robust central counterparty.
- Increased Transparency: The mandatory reporting of data and access to centralized databases in real life has increased transparency in the financial market.
- Reduced Risk: The promise of guaranteed settlement from an acknowledged and certified entity has resulted in reduced risk of default.
- Reduced Settlement Costs: CCIL reduces the settlement costs by consolidating different transactions and operational tasks.
- Regulatory Compliance: CCIL ensures regulatory compliance in the market by keeping comprehensive records and enforcing RBI regulations.
Key Achievements of Clearing Corporation of India Limited
In its journey of over two decades, CCIL has made several contributions to the development of the financial markets, like government securities. Its key achievement occurred in 2015. It received the ISO/IEC 27001:2013 certification from DNV GL, which indicates its commitment to safeguarding valuable information assets.
Clearing Corporation of India Limited Subsidiaries
CCIL has the following two subsidiaries, which are structured with specific objectives.
ClearCorp Dealing Systems India Limited
It was incorporated in 2003. Its aim is to manage trading systems, which are developed to simplify money, fixed income, forex, and OTC derivatives market trading. NDS-OM, NDS-CALL, TREPS, CROMS, FX-CLEAR, and ASTROID trading platforms are managed under this company.
Legal Entity Identifier India Limited
It was set up as a Local Operating Unit to issue globally compatible LEIs in India. LEI LEI is a unique international reference number that identifies every legal entity participating in a financial transaction under any jurisdiction.
Seamless GSecs Investment with GoldenPi
With access to the government securities market becoming so easy and the Clearing Corporation of India Limited ensuring guaranteed settlement, investors have an encouraging investment environment. GoldenPi brings a complete and comprehensive platform to add to the ease and convenience of investment. Pay a visit, and you will notice how seamless navigating through different segments and accessing information is.
GoldenPi will display a list of the latest Gsec issues, including the offered interest rates, maturity period, payout, and other necessary details. You can sign up and complete the KYC without any hassle. Once it is done, proceed to choose any security and make the payment. Now, relax and reap the investment benefits.
FAQs About Clearing Corporation Of India Limited For GSecs
1. What types of trades are settled through CCIL?
The transactions of government securities in the secondary market are settled via CCIL. The trades completed in the outright, market repo, and triparty repo markets are taken for settlement. The trades are received in securities, including treasury bills, central government securities, state government securities, and STRIPS (both new issues and re-issues).
2. When are the members informed of the completion of the settlements?
Once the settlement status report is generated, CCIL uploads it to the Report Server, and then the members are informed of the settlement’s completion. The status is generally posted around 4.30 pm on working days.
3. How do you become a member of CCIL?
You will find the CCIL membership application form on its website. On the home page, under the Services segment, there is a section on membership. Click on ‘how to apply,’ and you will see a link to the E-Registration portal. It will redirect you to a new page where you can enter your mail ID and request a membership.How will the reports be made available to members?
All the reports will be available on the CCIL Report Server. Members can check at their convenience.
4. How does CCIL handle the shortage of funds in case of a member’s obligation to non-deliver funds?
CCIL shall access the Rupee Line of Credit available for the purpose and/or the balances in its RBI Current account to bridge the fund shortage of members. The securities payout to be received by the member will be withheld.
