Attention of the Clearing Members of the Indian Clearing Corporation Ltd. (ICCL) is hereby drawn to the Circular No. 20140314-12 dated March 14, 2014 and Circular No. 20140305-18 dated March 5, 2014, issued by BSE Ltd. (BSE) regarding commencement of trading in its New Debt Segment (NDS). As mentioned therein, Indian Clearing Corporation Limited (ICCL) will, inter alia, undertake clearing and settlement activities for BSE’s NDS Segment as per the circulars/guidelines that may be issued in respect of the same from time to time.
Accordingly, the norms pertaining to clearing settlement process, margins, deposit / withdrawal of liquid assets (collateral), etc. are as follows :
· Settlement Process - Annexure I.
· Margins - Annexure II.
· Liquid Assets – Annexure III.
· Procedure for deposit/withdrawal of liquid assets – Annexure IV.
For details Clearing Members of ICCL-BSE NDS may also refer to SEBI circular CIR/MRD/DP/ 27 /2013 dated September 12, 2013, and any other circulars issued by SEBI, BSE and ICCL from time to time.
In case of any clarifications members may contact :
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Sr.No.
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Name of Officer
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Contact no.
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1.
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Mr. Ajay Darji
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022-22728468
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2.
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Mr. Ankit Jain
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022-22728881
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3.
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Ms. Simranjit Arora
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022-22728833
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4.
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Mr. Gaurav Patel
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022-22728843
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For Indian Clearing Corporation Ltd.
Asst. General Manager.
Encl. : as above.
Annexure – I
Clearing & Settlement procedure/norms for New Debt Segment (NDS) :
- The settlement of trades done in NDS Segment would be settled only in dematerialised mode on a DVP - 1 (no netting of securities and funds) or DVP - 3 basis (netting of securities and funds) depending on the type of traded corporate bond, with a settlement cycle of T+1 basis. Members need to be aware and careful in respect of the type of corporate bond for which the trade is executed in the said segment.
- Following market types are to be used for giving instructions to the Depositories for securities pay-in :
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NDS Pay-in
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Market Type
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For DVP – 1 transactions
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DEBT T1
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For DVP – 3 transactions
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DEBT T1
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- The pay-in and pay-out of funds and securities shall be through the designated clearing bank account and securities settlement account respectively.
- For securities demat account the NDS Member may approach the depository participants in respect of Pool / Principal accounts for settlement of securities obligations under NDS.
- The transactions under NDS would be settled on a T+1 day basis as per time lines and settlement schedule specified by ICCL from time to time. The members would be required to maintain clear balance in their Bank Accounts / Depository Pool Accounts for funds / securities by the scheduled time on T+1 day.
Members may further note that :
Settlement guarantee will be provided in respect of bonafied trades settled on DVP-3 basis.
No settlement guarantee will be provided for trades settled on DVP-1 basis.
Annexure II
Margins :
The margins in respect of trades done in NDS segment would be as specified by SEBI, Exchange and Clearing Corporation from time to time. For details pertaining to margins, members are advised to refer to SEBI Circular No. CIR/MRD/DP/ 27 /2013 September 12, 2013 in respect of same.
For trades settled on DVP-3 basis the following margins will be applicable :
Initial Margin (IM) :
Initial margin shall be based on a worst case loss of a portfolio of an individual client across various scenarios of price changes so as to cover a 99% VaR over one day horizon.
The minimum initial margin shall be 2% for residual maturity up to three years, 2.5% for residual maturity above three years and up to five years; and 3% for maturity above five years. The margin shall be calculated as percentage of traded price of the bond expressed in terms of clean price i.e. without taking accrued interest into account.
The Initial Margin shall be deducted upfront from the liquid assets of the member taking into account gross open positions.
Extreme Loss Margin (ELM) :
The ELM shall cover the expected loss in situations that go beyond those envisaged in risk estimates used in the initial margins. The ELM for any bond shall be 2% of the traded price expressed in terms of clean price. It would be deducted upfront from the total liquid assets of the member.
The margins pertaining to NDS segment would be computed at a client level and collected/adjusted upfront from the liquid assets of the Clearing Members on an on-line real time basis
Annexure III
Liquid assets
The liquid assets for trading in New Debt Segment are to be maintained separately.
Liquid Assets (collateral) : The liquid assets may be deposited in the following form:
(a) At least 50% in cash or cash equivalents i.e. bank guarantee, fixed deposits or units of liquid mutual funds;
(b) Not more than 50% in the form of corporate bonds / liquid equity shares/ mutual fund units other than units of liquid mutual funds.
The cash/cash equivalent component should be at least 50% of the total liquid assets. Hence, non-cash equivalent component in excess of the total cash/cash equivalent component would not be considered as part of Total Liquid Assets.
The norms in respect of liquid assets i.e. composition of liquid assets, types of liquid assets, applicable haircuts, single bank and single issuer exposure limits, etc. would be mutatis mutandis applicable from the BSE - Equity Cash Segment.
Annexure - IV
Procedure for deposit of liquid assets for the New Debt Segment :
Cash :
For depositing cash towards liquid assets, the Clearing Members need to send their online instruction for the concerned segment through the BEFS Module to their respective Clearing Banks for confirmation of such request for enhancement of cash collateral. The weblink of the said BEFS module is as under :
Fixed Deposit Receipts (FDRs) :
The FDR(s) of a scheduled commercial bank can be deposited by the Clearing Members towards liquid assets. The FDRs deposited by the Clearing Members should be issued in favour of “Indian Clearing Corporation Ltd. A/c – Trade Name of the Clearing Member" and should be duly discharged by the Clearing Member himself or an authorised signatory of the member on the reverse of the FDR. The FDRs are to be deposited along with a letter from the concerned bank addressed to ICCL.
Renewed FDR instruments and the bank’s letter in the prescribed format are to be submitted along with a covering letter by the Clearing Member in the prescribed format.
Bank Guarantee(s) :
The bank guarantees towards liquid assets should be of a scheduled commercial bank as per the prescribed format given on weblink. The Clearing Members can deposit bank guarantee(s) to ICCL without the claim period. In such cases i.e., where bank guarantee(s) are submitted without a claim period, the amount of the bank guarantee(s) would be removed from the liquid assets of the member at least seven days before the expiry date of the bank guarantee(s).
The bank guarantees are to be submitted alongwith a covering letter of the Clearing Member in the prescribed format to ICCL.
Renewed bank guarantee and a letter of the concerned bank in the prescribed format are to be submitted along with a covering letter of the Clearing Member in the prescribed format.
Clearing Members may note that :
- The FDR(s)/bank guarantees (deposited by the Clearing Members towards Liquid Assets) issued by branches of scheduled commercial banks outside Mumbai would be accepted provided the same should be payable at any of its branches in Mumbai.
- No trading limits would be available on matured FDRs/Bank Guarantees.
Eligible securities and units by way of pledge :
Clearing Members can deposit eligible securities in dematerialised form towards liquid assets by way of pledge. Clearing Members need to execute a Deed of Pledge in favour of ICCL and complete the necessary formalities before initiating pledge of securities towards liquid assets.
Procedure for withdrawal of collaterals :
For withdrawal of collateral deposited towards liquid assets (Cash/FDR/BG/Securities/units, etc) members need to give on-line release instructions on any working day by 4:00 p.m. through the CLASS – Collateral Module.
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