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    Sebi panel suggests interoperability between clearing corporations

    Synopsis

    For traders executing trades on more than one stock exchanges, interoperability would help them use funds better.

    ET Bureau
    MUMBAI: A Sebi panel, headed by KV Kamath has suggested interoperability between existing clearing corporations. For traders executing trades on more than one stock exchanges, interoperability would help them use funds better.

    "..the committee recommended that at this juncture, maintaining separate clearing corporations for each exchange would be prudent. However, Sebi may keep the interoperability option open and consider the proposal for implementation when ground conditions are met, which, inter alia, include clear intent of the participants coming together and having a suitable framework in place to the satisfaction of Sebi," says a report by the expert panel which was set up to look into the viability of introducing a single clearing corporation or interoperability between different clearing corporations.

    In India, all stock exchanges have their clearing corporations, which is a critical link in the stock trade settlement system. Indian Clearing Corporation, National Securities Clearing Corporation and MCX-SX Clearing Corporation clear all the trades in India.

    The genesis of a single clearing corporation or interoperability between existing clearing corporations stems from the current suboptimal utilisation of capital, wherein margins need to be deployed by market participants even if transactions are offsetting in nature till the time pay-ins are made. Besides,the lack of flexibility for the market participants in choosing the venue for the clearing and settlement services results in higher cost to the market participant.

    Supporters of interoperability of clearing corporations highlight that it gives the trading members the option to clear trades with the clearing corporation of their choice. In the Indian context, for example, an investor could trade on, say BSE, and get the trade cleared through the clearing corporation of the NSE, or vice versa which would result in efficient use of capital for trading members who take positions on multiple stock exchanges. Sebi has sought public comments by September 24, 2015.

    Presently , interoperability is applicable only for cash markets. Globally , the facility of interoperability is not available for derivatives as these products are created by an exchange with specific trading and risk management features and hence, such products are traded and cleared only on the respective exchange.

    The expert panel has also proposed to do away with the current requirement of transferring 25 per cent of stock exchange profits to the settlement guarantee fund.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

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