What is the role of Clearing Corporation of India?

The Clearing Corporation of India Ltd. (CCIL) was set up in 2001 commenced business operations in the securities market on February 15, 2002. CCIL provides an institutional infrastructure for the Clearing and Settlement of transactions by banks, financial institutions and primary dealers, in Government Securities, Money Market instruments, Foreign Exchange and other related products. The Clearing Corporation plays the key role of a Central Counter Party (CCP) in the government securities, USD –INR forex exchange (both spot and forward segments) and Collaterised Borrowing and Lending Obligation (CBLO) markets. CCIL plays the role of a central counterparty whereby, the contract between buyer and seller gets replaced by two new contracts – between CCIL and each of the two parties. This process is known as ‘Novation’. Through novation, the counterparty credit risk between the buyer and seller is eliminated with CCIL subsuming all counterparty and credit risks. CCIL follows specific risk management practices as per international best practices in order to minimize these risks.

CCIL has started systems like Trade Repository for the interest rate, forex and credit derivatives and Trade Compression for the OTC derivatives market and has developed electronic trading platforms for various segments of the G-Sec, money, forex and OTC derivatives market. It also offers settlement services to the Government. Trade depositories maintain a centralized electronic database of OTC derivatives transaction data by which market has been benefitted with more information regarding prices and volumes on each member’s own portfolio. It also assisted the regulator in effective monitoring of systemic risk. In addition to the guaranteed settlement services, CCIL also provides non-guaranteed settlement services for National Financial Switch (Inter bank ATM transactions) and for rupee derivatives such as Interest Rate Swaps. It also started dissemination of, bond, SDL, T-bill indices, reference rates like CCBOR/CCBID, forex spot rates, market liquidity indicators for Government Bond market, tracking the bid-ask spread, order book size, impact cost, turnover ratio and  major inter-bank OTC forex derivatives on its website.

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