Clearing & Settlement:

CBLO operates on a Straight through Processing (STP) environment. The trade flows from CBLO Dealing System for Clearing and Settlement. The trades received are novated and netted for settlement. A single obligation is generated for each member for each settlement date by netting trades received for settlement that business date with redemption obligation for the same date. The funds settlement is achieved at Settlement Bank for those CBLO members who are either not permitted to open a current account at RBI or those who are permitted and maintain a current accout are not allowed to operate those current account for settlement of secondary market transactions. CBLO Funds settlement is achieved at RBI for those members who maintain current account at RBI and are allowed to settle secondary market transactions in such account. The securities of equivalent value are blocked for members utilizing borrow limits. CBLO credits in the form of book entry are given to those members who have lent funds after the CBLO Funds settlement is completed. A report is made available giving details of securities encumbered in CBLO segment.

CBLO Funds Settlement @ Settlement Bank :

The net fund obligation in CBLO Segment for those members who either do not maintain a Current Account with RBI or not allowed to operate such current account for settlement of secondary market transactions are achieved at Settlement Bank. A single obligation generated for such members CBLO Funds obligations is transmitted electronically to the Settlement Bank containing details of Funds Pay-in and Pay-out to be effected by the respective Settlement Bank. The Settlement Bank shall after effecting such Pay-in and Pay-out, confirm back electronically the completion of such process. The onus on ensuring that sufficient funds are made available in the respective current account with Settlement Bank rests with the CBLO members settling through Settlement Bank.

CBLO Funds Settlement @ RBI Current Account:

The funds settlement for those members who maintain a Current Account with RBI and are allowed to settle secondary market transactions in that current account is achieved in RBI Current Account of those members. A single funds obligations for CBLO segment is generated for each of these members which include Pay-in and Pay-out positions in respect of their proprietary positions and also on account of those obligations of other members for whom they have undertaken the function as a Settlement Bank.

Risk Management:  

CCIL addresses risk relating to trading and settlement by adopting stringent membership norms by restricting its membership only to the entities which meet the minimum eligibility criteria. Members are allowed to borrow to the extent of the limit fixed after MTM valuation of securities with appropriate haircut. The securities in the CSGL account are subjected to daily valuation and any deficit in the value of the securities vis-à-vis the borrowed amount (face value of CBLO) is collected from the concerned members. Besides, CCIL stipulates initial margin for the lenders in the Auction market and for each bid and offer in the Normal market to address the interest rate risk, in case the lenders do not honor their commitments. In case of members failure to deposit such deficit on the same day, it is treated as a Margin Default and penalty is charged accordingly.

Default handling:

 (i) Funds Shortage :

Shortfall in funds can take place when the members (by lenders on the day of lending and by borrowers on the day of redemption) fail to meet funds obligation on the day of settlement. In such cases, CCIL meets the shortage by utilizing the lines of credit extended by the member banks / Settlement Banks and complete the settlement. CCIL then initiates the default handling process by withholding the CBLO receivable by the lenders (defaulting members). In case of failure by the borrower to meet the redemption proceeds on maturity of CBLO, the underlying securities of such member stands encumbered till the funds are replenished along with charges. In case of eventual default, CCIL liquidates the underlying securities / CBLO and adjust the proceeds towards the shortfall and other charges.

 (ii) CBLO Shortage :

CBLO shortage can take place when the members Borrow / sell CBLO without having sufficient borrowing limit or concerned CBLO in their account. In case of CBLO shortfall, CCIL withholds the funds receivable by the defaulting members and creates CBLO to the extent of CBLO shortfall quantity by using the withheld funds and credit the same to the concerned buyers’ CBLO account. Alternatively, CCIL may also opt for Close-out process by reducing the CBLO shortfall quantity proportionately from the buyers (lenders) receivable position in the concerned CBLO.