The capital market regulator SEBI has said that National Securities Clearing Corporation Ltd (NSCCL), Indian Clearing Corporation Ltd (ICCL) and MCX-SX Clearing Corporation Ltd (MCX-SXCCL) are the only qualified central counterparties (QCCPs) in the Indian securities market.

The three corporations clear and settle trades in securities or other instruments/ products traded on the stock exchanges.

When a buy order in an exchange matches with a sell order, a trade is generated. The central counterparty steps in between the buyer and the seller and acts as a buyer to every seller and a seller to every buyer guaranteeing settlement of trades. This process is called novation. Clearing corporations maintain funds for guaranteeing trades, settlement and in case a buyer or a seller defaults.

SEBI said NSCCL, ICCL and MCX-SXCCL have qualified as they are regulated by the SEBI Act and the Securities Contract (Regulation) Act.

Clearing Corporations are designated as Market Infrastructure Institutions for oversight considering its systemic importance in securities markets regulated by the SEBI.

They are also subject to rules and regulations that are based on International Organisation of Securities Commissions’ (IOSCO) Principles for Financial Market Infrastructures (PFMIs).

These principles were issued by IOSCO in April 2012 to enhance the safety and efficiency in payment, clearing, etc.

SEBI as a member of IOSCO is required to adopt the PFMIs in line with the expectations of the G20. (The Hindu)