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Page Content
1. |
What is Base Limit?
Base Limit for a member is the minimum limit for the member for
each settlement date. Base Limit is kept separate so that the process of
submission of trades to CLS Bank can continue unhindered for settlement dates
other than the Settlement Date for which settlement is under progress. This
limit is normally not altered and needs to be supported by collaterals.
Collaterals accepted towards Base Limit are: a) Bank Guarantees b) US Dollar
deposits c) Cash/Govt of India securities
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2. |
What is Early Pay-out?
An important aspect in regard to the CLS settlement is the
identical time lines decided for settlement in all participating currencies.
The time lines set presently is between 7.00 hrs CET to 12.00 hrs CET. Even
though it is possible to make payments in JPY or AUD at around 12.00 hrs CET
for CLS settlement, it is difficult for the receiving entities to deploy such
funds in the local market as by such time either the market is closed or the
local RTGS is out of operation. To take care of this problem, Settlement banks
normally allow pay-outs in Far Eastern currencies before the corresponding
pay-ins are made, by taking credit exposures on the third party entities
settling through them. Such pay-outs are termed as early pay-outs.
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3. |
What is Additional CLS Limit?
Additional CLS Limit is a
variable limit which CCIL allows to its members depending on their necessity,
subject to their having adequate collaterals with CCIL. It takes care of limit
requirement relating to early pay-outs. The collaterals to be used towards
Additional Limits are as under: a) US Dollar Deposits b) Cash/Govt of India
securities
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How is exposure verification done?
Computation of member-wise
Limit utilization is done on an online basis. Monitoring of Additional CLS
requirement is done by way of periodic evaluation of member-wise limit
utilization positions.
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What happens if already accepted trades cause exposure limit breach?
It may so happen that there may be a sudden increase in Limit
Utilisation by a member beyond his available limit (it can happen due to change
in exchange rate or in haircut rate). CCIL may then, at its discretion, decide
to unilaterally rescind the trades of such member, if the member fails to
provide adequate collateral to support such increase in utilisation beyond his
Base Limit. Alternatively, a member may opt to avail pre-funding an amount
equal to the extent of shortfall in limit in order to avoid rescind of trades
by CCIL. Such sudden increase in limit utilisation may also occur due to
rescinding of a trade by CCIL’s member or his counterparty or due to an
off-setting trade remaining unmatched at CLS till the cut off time for the
settlement date.
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6. |
What is the extent of guarantee in CLS Settlement?
CLS settlement is not a
guaranteed settlement and it only ensures that the settlement happens on a
Payment Versus Payment (PVP) basis. CCIL does not offer Central Counterparty
(CCP) clearing services in this segment. It only facilitates access to the CLS
settlements for its members. It neither novates nor guarantees settlement for
this segment.
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