Clearing trades through a central counterparty (CCP) is considered to be the most effective way of managing counterparty risk in both cash as well as derivatives markets. The Clearing Corporation of India Limited (CCIL) plays the pivotal role of a risk mitigating central counterparty in the OTC markets in India. CCIL offers CCP clearing services in the Securities, Money Market, Forex and Rupee Interest Rate Derivatives markets. It has put in place a wide range of risk management practices which ensure that that the ultimate risk to its members on account of counterparty failure is either eliminated or reduced to the minimum. 

Central clearing exposes CCIL to market risk which may manifest into credit risk on default of any of its members.  The resultant exposure is managed by collecting risk-based margins - primarily Initial Margin to cover the potential future exposure (PFE) and Mark to Market (MTM) margin to cover the current exposure. Apart from these two margins, CCIL also charges Volatility Margin and in some cases, Concentration Margin is also charged. 

A member availing CCP clearing services in CCIL's Securities, Forex Forwards and / or Rupee Derivatives segment is expected to meet all its margin obligations by depositing specified eligible securities and cash in its common margin pool referred to as ‘Member Common Collateral’ (MCC). MTM gains on the trades accepted by CCIL in Forex Settlement, Forex Forward and Rupee IRS Segment are credited to the concerned member's MCC pool and treated as margin made available by the member. Margin utilisation alerts are sent to members by way of SMS and emails. These alerts are triggered on the breach of pre-defined margin thresholds. A separate collateral pool is maintained for availing Borrowing Limit in the Triparty Repo segment. In the Forex segment, Exposure Limits are required to be supported by collateral in the form of US dollars.

CCIL maintains prefunded resources to cover the potential losses arising from the default of a member. Under the principle of loss mutualisation, these resources comprise of the CCIL’s own funds set aside for this purpose (also referred to as CCIL's ‘Skin in the Game’) as part of its Settlement Reserve Fund and a Default Fund contributed by all members. CCIL has in place a Default Waterfall structure to absorb and mutualise losses on account of member default. The Default Waterfall as specified in CCIL's Bye-laws, Rules and Regulations (BRR) specifies the order in which the pre-funded resources can be used to meet these losses arising out of default by a member.

Default handling procedures for each clearing segment are laid down in the Byelaws, Rules and Regulations (BRR). To increase members’ awareness of the default procedures, CCIL conducts semi-annual default handling drills with active participation of the market participants. The risk management policies and practices are reviewed regularly and these are benchmarked to the best global practices in the respective areas. Risk processes are also reviewed annually by independent external experts. CCIL believes in complete transparency with regard to its risk management practices. All risk processes are notified to members and are made available on CCIL's website. We strive to ensure that each participant is able to view all its positions, margin obligations, settlement status, liquidity exposures, collaterals, default fund requirements etc. on real time basis, so that they can use this information to assess their risks and plan their actions accordingly. With this in mind, a comprehensive risk management dashboard called ‘Integrated Risk Information System (IRIS)’ has been provided to all members. In line with the best-practice guidance issued by the Committee on Payments and Market Infrastructures and the Board of the International Organization of Securities Commissions (CPMI-IOSCO), CCIL publishes disclosures pertaining to CPMI-IOSCO's Principles for Financial Market Infrastructures (PFMI). The Qualitative Disclosures are published once a year while the Quantitative Disclosures are published on a quarterly basis. Apart from this, CCIL publishes daily risk measurement data such as the Sovereign zero coupon yield curve and daily Mark to Market prices for Securities.  

CCIL provides trade compression services in the Rupee Derivatives segment as well as in the Forex Forwards segment. This involves identification of economically redundant trades which can be terminated early before their maturity while keeping the risk profile of the trade portfolio within the tolerances provided by the participating members. Multilateral portfolio compression conducted by CCIL serves as a balance sheet reduction mechanism and helps banks to free up capital held against offsetting positions in derivatives. 

As the Risk department relies heavily on the feedback of the members and other interested persons for initiating measures to improve efficiency of the risk processes etc., it considers receiving their comments/ suggestions as a privilege. 

Points of Contact:

Risk Management Related Area Point of Contact  
Securities Segment and Tri-Party Repo   022-61546428 / 68 / 21 / 17 / 14
G Sec Valuation, Margin Factors, Hair-Cut, MCC Balance Utilization, MCC Margin Shortfall, Penalty related matters 022-61546428 / 68 / 21 / 17 / 14
Integrated Risk Information System (IRIS) 022-61546421 / 17
Forex USDINR and Forex Forwards 022-61546417 / 16
Rupee IRS Derivatives (MIBOR / MIFOR)   022-61546433 / 32 / 30
Default Fund   02261546417 / 28 / 16 / 21 / 30
Credit Risk Monitoring   02261546412 / 15 / 18/ 36
Net Debit Cap/Single Order Limits 02261546418/ 12/15
Stress testing / Default Handling & Waterfall 02261546437 / 39 / 18
Portfolio Compression Services   02261546433 / 32 / 30 / 39
Escalation: 02261546413 / 22 |
Segment wise NOTIFICATIONS on Risk Management Processes and Methodologies:
(Note- This link should redirect to Risk Management Segment wise notification Page)
Segment wise Risk Process Summary and FAQ :CCIL Website > Risk Management Tab-