What benefits are derived by the market through CCIL Settlement? The main benefits derived by the market through CCIL settlement are:
i. Counterparty Risk: CCIL novates itself as Central Counter Party to all trades and for members maintaining adequate margins provides guarantee for settlement of trade/s. The Counterparty risk is mitigated by this process;
ii. Settlement Risk: The settlement risk is mitigated by achieving settlement under DVP III in the books of RBI and Settlement Bank;
iii. Reduction in Intraday Liquidity requirement: The Intra Day Liquidity requirement for the market has come down substantially by the process of multilateral netting achieved for facilitating settlement;
iv. Multilateral Netting: Multilateral netting process has enabled Repo Rollovers, Short selling and trading in When Issued market;
v. Increase Operational efficiency: The entire process has resulted in reducing gridlocks thereby increasing operational efficiency and reduction in cost.
What types of trades are settled through CCIL? The secondary market transactions in Government securities are settled through CCIL. The trades concluded in Outright and Repo market are received for settlement and instruments in which trades are received include Treasury Bills, Central Government Securities, State Government Securities, STRIPS and When Issued - both New Issues and Re-Issues.
Is it a pre-requisite to become a member of NDS for settlement through CCIL? Yes. Only trades done by an NDS member which are received by CCIL are processed for Clearing and Settlement by CCIL.
Under what circumstances the trade will be rejected?
The Clearing Corporation shall have the right to reject the trades reported to it by the members for settlement under the following conditions:
o When the aggregate value of the trades done by the member has exceeded his risk exposure limits. Such trades are accepted for settlement without Guarantee.
o When one of the counter-parties to the trade has been suspended or has been rendered ineligible to avail of the Clearing Corporation's services whether temporarily or otherwise.
o When one of the counter-parties to the trade is not a member of CCIL.
o When the trade has been received by the Clearing Corporation from the NDS after cut-off timings rendering the clearing and settlement of the relative trade for that settlement date impossible.
o In the event of the sudden development when clearing and settlement operations for the particular settlement date have been temporarily suspended.
o When there is any inaccuracy in the reporting of the trade viz. incorrect NDS membership ID etc.
What is the cut off time for secondary market transactions and when are trades received by CCIL for Clearing and Settlement?The secondary market timing for settlement type T+0 and T+1 shall be as stipulated by RBI for that business day. The trades from NDS-OM and CROMS flow online for exposure monitoring, Clearing and Settlement. The trades reported on NDS are received in Batch mode. Batch I is received by CCIL from RBI after the closure of market hours for secondary market in Government securities transactions for T+0 settlements. Batch II shall be sent by RBI to CCIL after the closure of market hours for T+1 settlement. All transactions for T+0 settlement type shall necessarily be part of Batch I and no secondary market transactions for T+0 settlement type can be received in Batch II. The trades received for settlement in Batch I may be for settlement type T+0, T+1 or T+N whereas those received in Batch II is for T+1 or T+N settlement.
What is shut period? Shut period refers to the period during which no settlements are permitted in a security.
What is novation? Novation is a process wherein CCIL interposes itself as Buyer to every seller and as a Seller to every Buyer in respect of trades received by it for settlement. CCIL becomes Central Counterparty to both counterparties to the trade through the process of novation.
What is DVP-III? DVP III is a settlement process in which settlements are done on Delivery versus Payment after achieving multilateral netting. For each Settlement date, the funds are netted for all secondary market transactions in Government securities market whereas in case of securities, the multilateral netting is achieved for each member separately for his SGL and CSGL account and within each such account for each ISIN.
What are the different reports that are sent to the members? The different reports that are made available to members are:
o Trade Acceptance Report.
o Rejected Trade Reports - Securities.
o Trade Exceeding Exposure Limit (in case a member exceeds the exposure limit).
o Modified Settlement Date Report.
o Final Settlement Obligation Report for Securities.
o Final Settlement Obligation Report for Funds.
o Settlement Status Report.
o Interim Settlement Obligation Report for Funds.
o Interim Settlement Obligation Report for Securities.
o Funds and Securities Shortage Report (in case of shortage in funds or securities pay-in).
o Security Shortage Allocation Report.
o Securities and Funds Replenishment Report.
o Security and Funds release Report.
o Summary of Funds Settlement for CBLO and Securities segment.
o Form IV for Gilts trade o Form IV for REPO trade
o Consolidated Funds Pay-in/Pay-out Obligation Report
o Report on Cancellation / Postponement of WI/Auctions Trades
o Provisional Pay-out Instructions
How the reports will be made available to members? All Reports are made available to members through CCIL Report Server.
In case of default by a member, what are the Default charges?
The defaulting member is charged a default charge of 5 basis points per day on the amount of default in funds or security. The default charges are subject to changes from time to time.
How is the non defaulting member compensated in case a trade is allocated? In case of Securities default, the non defaulting member is compensated on default day through either cash compensation or some other security. Any loss to the non-defaulting member on account of selling the security allocated and / or purchase of the security under default can be claimed by the non defaulting member on the next business day by providing details of such transactions concluded in the secondary market. Similarly, in case of funds default, the non defaulting member is compensated through securities and he can claim the loss, if any, on the next business day by providing details and rate at which that security is sold by the member in the market.