The Clearing Corporation

of India Limited
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ORGANIZATION
The Clearing Corporation of India Ltd. (CCIL) was set up in 2001 to provide an institutional
infrastructure for the Clearing and Settlement of transactions in Government Securities, Money
Market instruments, Foreign Exchange and other related products. The objective was to bring
efficiency to the transaction settlement process, mitigate the systemic risk emanating from
settlement related problems and counter party risk. It aimed to pave the way for broadening and
deepening the financial markets in the country.
The Reserve Bank of India (RBI) took the initiative to set-up the Company. The RBI constituted
a core committee in June 2000 with representatives from major banks, all-India financial
institutions, industry associations like FIMMDA (Fixed Income Money Market and Derivatives
Association of India), PDAI (Primary Dealers Association of India), FEDAI (Foreign Exchange
Dealers Association of India), AMFI (Association of Mutual Funds in India) and RBI to initiate
the process of setting up a clearing corporation. CCIL is the final outcome of the said core
committee.
CCIL commenced business operations in the securities market on February 15, 2002 with
settlement of Government securities comprising of outright and repo transactions reported in
the Negotiated Dealing System (NDS) of RBI. Incidentally, NDS also went live on the said date.
CCIL has moved on to cover settlement of forex and many other products as well. In addition
to its various activities, CCIL through its fully owned subsidiary, Clearcorp Dealing Systems
(CCDS), hosts various trading applications. The trading platforms hosted by CCIL includes two
each in forex and money market owned by CCDS, two electronic platforms for RBI, the first for
facilitating secondary market trading in Government Securities and the second for dealing in
Call, Notice & Term money. Since August 2007, CCIL has been running a trade repository for
the OTC Interest Rate Swaps (IRS) and Forward Rate Agreements for Market Makers and since
November 2008 providing non-guaranteed clearing and settlement of daily payment obligations
for trades in this market. CCIL is also the trade repository for all transactions in the CDS market
and for all inter-bank and client foreign exchange derivative transactions. The Company has
developed and is managing trade reporting systems in the corporate bond, CP/CD market and
corporate bond repos on behalf of FIMMDA.
CCIL also developed portfolio compression for OTC interest rate derivatives like IRS trades which
was run successfully for the first time in July 2011. The 4
th
cycle of the Portfolio Compression
exercise carried out in March 2013 achieved a compression of 85.28%. With successive
successful Portfolio Compression run, the outstanding notional value of IRS trades in the market
has come down to ` 19,86,000 crore as in September 2013.
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As part of the global fraternity of payment and settlement systems, the company has adopted
the core principles set by the Committee of Payment and Settlement Systems (CPSS) of Bank
for International Settlements (BIS) and International Organization of Securities Commissions
(IOSCO) that prescribe the design and operation of payment systems world over. CCIL has
the distinction of being the first entity to whom authorization to operate as a payment system
provider has been granted by RBI under the Payment & Settlement Systems Act, 2007.
CPSS and IOSCO launched a comprehensive review of three existing sets of standards for
FMIs in February 2010 and a comprehensive set of 24 principles were issued as part of the
report titled Principles for Financial Market Infrastructure (PFMI) published in April 2012.
The new principles have strengthened the existing standards, introduced new standards, and
enhanced the responsibilities of authorities. The members of CPSS and IOSCO are required to
strive to adopt the PFMI in their respective jurisdictions. RBI is committed to the adoption and
implementation of the new CPSS-IOSCO standards of PFMIs. The FMIs regulated by RBI are
Real Time Gross Settlement System (RTGS), Securities Settlement Systems (SSS), Clearing
Corporation of India Ltd (CCIL), Core Banking Solution (CBS), Continuous Linked Settlement
(CLS) and Negotiated Dealing System- Order Matching (NDS-OM). CCIL is on the move to
adopt the CPSS-IOSCO Principles for Financial Market infrastructures to achieve the Qualified
Central Counterparty status under Basel III rules.
The business models of the company have been based on strong domain expertise duly aided
by the efficient Information Technology (IT) infrastructure. The experience of the vast pool of
human resources at the disposal of the company is the driving force in its success. Within a
span of 10 years or so, the company has established itself as a very strong company in its
line of business. This has been possible with the support and guidance of RBI and market
participants. CCIL has been able to provide comfort to the market participants by taking out the
counterparty risk and mitigated the settlement risk from the system through its novation process.
CCILs domain expertise was duly acknowledged by RBI when it executed NDS Hive off project
and requested the company to build and manage trading systems like NDS-OM, NDS-Call and
NDS-Auction for the benefit of the market participants. This has helped the market to move into
a higher plane in terms of efficiency and microstructure. CCILs unique experiment with CLS
(Continuous Linked Settlement) for facilitating settlement of cross currency transactions of all
Indian banks is viewed internationally as a model to emulate, and has enabled banks in India to
settle their cross currency deals with reduced risk and liquidity.
CCIL has received the ISO/IEC 27001:2005 certification from M/s Det Norsk Veritas in July
2006 for securing its information assets. The entire information security management process
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implemented at CCIL adheres to the latest international security standard ISO 27001. The ISO/
IEC 27001:2005 certification from DNV was extended upto 2015. In October 2007, CCIL joined
as a member of the CCP12, an international organization of central counterparty (CCP) clearing
organizations. RISK, the renowned global magazine in its 25
th
year special edition has identified
CCIL as a Firm of Future amongst global CCPs/Exchanges based on its Risk Management
capabilities. CCIL is the only entity outside the developed countries to get such recognition.
CORE COMPETENCY
CCIL has built its domain expertise in its core areas of business and used the same not only
for its own growth model but also to provide cost effective and efficient solutions to the market
participants. The company enlarged the scope of its operations by leveraging the infrastructural
facilities at its disposal by introducing new services / products that could widen and deepen the
Debt, Money, OTC Derivatives and Forex markets.
It is an organization which provides an umbrella for settlement of multiple products. It is based
on the concept of multilateral netting by a central counterparty for a transaction in the OTC as
well as anonymous order driven markets. The process followed by the company has contributed
to the efficiency and robustness of the financial system in the country. Multilateral netting has
helped in reducing the counterparty risk for the entire system. The facility of centralized clearing
and settlement coupled with the settlement guarantee offered by the company are of great
comfort and advantage to the market participants. However, CCIL proposes to move to PvP
based settlement of forex transactions to completely mitigate counterparty credit risk and do
away with the loss allocation process in its current form.
In addition to substantially reducing individual member funding requirements, the multilateral
netting provided by the company reduces liquidity risk as well as counterparty credit risk from
a gross to net basis. The reduction in the number and overall value of payments between
members has enhanced the efficiency of the payment system and reduced settlement costs
associated with growing volumes of market activity. The netting factor in the securities, funds
and forex settlement has been increasing over time indicating better management of liquidity
in the market. The netting figures are comparable to world standards. The earlier instances of
gridlock are history after CCIL came into the settlement arena.
In the currency market, delivery of currencies involved in a typical Forex transaction does not
happen simultaneously due to time zone differences. To take care of the risks associated with
this, the company has set up a robust risk control mechanism by setting exposure limits for
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the market entities and also putting in place a sound margining system supported by a loss
allocation mechanism.
The reporting platform for OTC Rupees Interest Rate Swaps (IRS/FRA) was developed by the
company and launched on August 30, 2007. The reported deals are processed by the company
to offer certain post trade processing services like matching, resetting interest rates, providing
settlement values etc. to the reporting members. Information with regard to traded rates and
volumes are posted online on the companys website. CCIL commenced Non-guaranteed
settlement of OTC Rupee Derivative trades from November 27, 2008.
CCIL has also developed a Trade Repository, for the purpose of reporting of CDS trades in
the market. This repository is capable of capturing trades between the Market Makers and also
between the Market Makers and their clients and has facility for affirmation of trades by Clients.
CCIL has also introduced effective August 2013, post trade service facilities such as Coupon
Computation and Succession Event Processing on trades reported to CCIL.
CCIL launched its Trade Repository services for OTC Foreign Exchange Derivatives on July
9, 2012. The first phase of the OTC foreign exchange (FX) derivative trade repository service
began with the capture of all inter-bank forex forwards and swaps in the USD-INR currency
pair, and currency options in FCY-INR. The second phase covering all inter-bank FCY-INR and
FCY-FCY Forwards and Swaps and FCY-FCY Options was operationalised with effect from
November 5, 2012. From April 2013, banks report forex derivative trades (forwards and options)
concluded by them with clients for value beyond a threshold of USD 1 million.
CCIL has launched a certification programme since January 2009, the CCIL Certification
Programme (CCP), an online testing and certification programme to assess the candidates
understanding and applicative skills in his area of competence. Currently the certification
is available in Fixed Income Market (Basic), Forex Market (Basic) and Risk Management
module.
CCIL has taken initiatives to develop and disseminate bond and T-bill indices, reference rates like
CCBOR and MIBOR and Forex Spot rates for the benefit of the market participants. To further
enhance the analytics in the fixed income market, the company has developed tenor based
indices to capture the tenor wise movement across the term structure. It has also developed the
CCIL SDL index to track the SDL market through a representative index.
CCIL has enabled online data dissemination of Negotiated Dealing System Order Matching
module (NDS-OM), NDS-CALL, CROMS, CBLO, IRS, FX-CLEAR transactions through Thomson
Reuters, Bloomberg, TickerPlant and NEWSWIRE18 terminals.
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OWNERSHIP & MANAGEMENT
State Bank of India (SBI), the country's largest commercial bank took the lead in piloting the
discussions at the Core Committee level and finalizing a blue print for CCIL's formation. The Core
Committee identified six 'core promoters' for the company - SBI, Industrial Development Bank
of India (IDBI)(now IDBI Bank Ltd.), Life Insurance Corporation of India (LIC), ICICI Ltd (now
ICICI Bank Ltd.), Bank of Baroda and HDFC Bank Ltd. These core promoters have collectively
contributed more than 50% of the total equity share capital of the company and the rest of
the equity capital was put up by other Financial Institutions, Primary Dealers and Banks. The
Authorized Share Capital of the Company is ` 100 crore consisting of equity share capital of ` 50
crore and preference share capital of ` 50 crore. Table 1.1 and Table 1.2 give the shareholding
pattern of the company.
Table-1.1: Equity Shareholding Pattern of CCIL
No. Shareholder Group Percentage Holding
1 Commercial Banks 62.50
2 Financial Institutions 21.50
3 Primary Dealers 16.00
Total 100.00
The preference share capital raised by issue of 8% Redeemable Non-Convertible Cumulative
Preference shares (RNCPS) during the year 2007-08 to the extent of ` 50 crore was redeemed
on respective redemption dates i.e. March 26, 2013 and March 28, 2013 respectively by issue
of 8.5% Redeemable Non-Convertible Cumulative Preference Shares (RNCPS-I) to the extent
of ` 50 crores and was fully subscribed to and paid-up by Banks.
Table- 1.2: 8.5% Preference Shareholding Pattern of CCIL
No. Shareholder Group Percentage Holding
1 Banks 100.00
Total 100.00
Board of Directors
The company has a sound governance structure and the day to day operations are looked after
by a Management team headed by the Managing Director of the Company, with policy guidance
from the Chairperson and the Board of Directors. The Chairperson and Managing Director are
nominated by SBI and the Board of Directors, as on October 1, 2013 consist of 17 members, of
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whom 9 are shareholder's representatives & 8 are independent directors representing various
professions such as Law, Finance, I.T., Forex, etc.Table-1.3 indicates details of the composition
of the Board of Directors of the Company as on October 1, 2013.
Table 1.3 Board of Directors
Name of the Director Position held Category
Mrs. Shyamala Gopinath Chairperson, The Clearing Corporation of India Ltd. Non-Executive Chairperson,
Promoter
Mr R. Sridharan Managing Director, The Clearing Corporation of India
Ltd.
Managing Director, Promoter
Mr. Y H Malegam Ex-Sr. Partner, S. B. Billimoria & Co. Non-Executive- Independent
Mr. S Venkiteswaran Senior Advocate Non-Executive-Independent
Mr. M R Ramesh Ex- MD, The Clearing Corporation of India Ltd. Non-Executive- Independent
Dr. Ajay Shah Director, National Securities Clearing Corporation
Limited
Non-Executive-Independent
Mr. P. Pradeep Kumar Dy. Managing Director & Group Executive(Corporate
Banking Group), State Bank of India
Non-Executive Promoter
Dr. N L Sarda Professor, IIT Bombay Non-Executive Independent
Mr. Pundarik Sanyal Ex-Managing Director, STCI Finance Ltd. Non-Executive Independent
Mrs. Shilpa Kumar Senior General Manager, ICICI Bank Ltd. Non-Executive Promoter
Mr. Bhavesh Zaveri Country Head-Operations, Cash Management Product,
HDFC Bank Ltd.
Non-Executive Promoter
Mr. M S Sundara Rajan Ex-CMD, Indian Bank Non-Executive Independent
Mr. V H Thatte General Manager (International operations and Resource
Management), Bank of Baroda
Non-Executive Promoter
Mr. Anjan Barua Former Deputy MD-Global Markets-SBI Non-Executive Promoter
Mr. V Chandrasekaran Executive Director (F & A), LIC of India Non-Executive Promoter
Mr. Melwyn Rego Executive Director, IDBI Bank Ltd. Non-Executive Promoter
Mr. Sankarshan Basu Prof. Finance and Control, IIM-Bangalore Non-Executive Independent
Committees of the Board
As part of its Corporate Governance initiatives, the Board has constituted different committees for
successful implementation of various policies of the Company. Details of the various Committees
that assist the management in shaping the policies and running the day to day affairs are given
at the end of this section.
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BUSINESS PROCESS IN THE ORGANISATION
CCIL is a well-knit and integrated organization that has smooth linkages with internal departments
as well as external entities including the Regulators. The entities which participate in CCILs
settlement process are known as Members or Associate members of CCIL. The company
has prescribed various membership eligibility criteria for such system participants (Members/
Associate Members) to ensure their financial and operational robustness for meeting obligations
arising from their participation in CCILs settlement operations, as per the international standards
for a CCP. The Membership eligibility criteria for various Settlement segments of CCIL have
been spelt out in CCILs Bye-Laws, Rules and Regulations, which are displayed on CCILs web
site www.ccilindia.com to permit fair and open access, as per the requirements of Payments and
Settlement Systems Act, 2007 and its Regulations.
CCILs Membership Department grants admission to eligible entities participating in money
market, debt market and foreign exchange/currency markets which include Banks/FIs, Primary
Dealers, Mutual Funds, Insurance Companies, Corporates etc. seeking membership to its
various business segments. The members are admitted after due verification of adherence to
eligibility criteria, approval by CCILs Committee of Directors on Risk Management/MD and
completion of documentation formalities. They are required to get their membership activated
by contributing to the Settlement Guarantee Fund/Collateral in the form of Cash/Govt. Securities
towards margins for transactions to be taken up for clearing and settlement by CCIL, before
commencement of clearing and settlement of their trades through CCIL. It is thereby ensured that
a member has adequate cover in terms of margin contribution with CCIL to extend guaranteed
settlement of its transaction.
Once the membership is activated on receipt of SGF/Collateral contributions, CCIL starts
receiving trades from the members. The respective operational departments then undertake
clearing and settlement activities that involve novation, netting and generation of obligations.
The risk management department is primarily responsible for ensuring that the risk management
processes and systems in place are adequate to cover the risks arising out of offering guaranteed
settlement of trades in different segments. It ensures that the margins are collected from the
members so that the risks from defaults, if any, are adequately covered. In some segments like
Forex, it also sets necessary exposure limits. The Fixed Income & Money Market Operations
Department provides production support to CBLO Dealing and Settlement, Outright and Repo
trades in Government Securities, novation, netting, generation of obligations, settlement of
funds at Settlement Bank/RBI and settlement of Securities in the Books of RBI. The Collaterals
and Funds Management Segment of Operations Fixed Income & Money Market Department
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ensures funds settlement in the books of RBI for CBLO, G.Sec, Forex and Derivatives. The
Collaterals and Funds Management Segment ensures final funds settlement in the accounts of
the concerned members with RBI and also ensures timely recording of receipt/refund of SGF/
Collateral contributions from/to members and prompt servicing of corporate action on members
outstanding SGF/Collateral contributions. CCIL has put in place Lines of Credit (LOC) in Rupee
and foreign currency (USD) to take care of temporary shortage of liquidity due to non-fulfillment
of settlement obligation by a member. The entire process from activation of membership
to settlement of trades is system driven and the IT Department ensures that the necessary
hardware and software solutions are in place.
Membership department also conducts Annual Membership reviews to ascertain Members
conformity/ adherence to these Membership criteria on a continual basis.
MARKET SEGMENTS
The main market segments currently covered by CCIL are:-
Government Securities
Money Market
Forex
Derivatives
A brief overview of the various market segments of CCIL are given below.
1. Government Securities
CCIL commenced its operations with settlement of secondary market transactions in Government
Securities sans novation, under DVP II mode, but in two months time it moved to extend
Guaranteed Settlement as a Central Counter Party. When CCIL initially commenced operations,
it was given the mandate to facilitate settlement of all Repo transactions and secondary market
outright transactions upto `20 crore. Though settlement through CCIL of outright transactions
beyond `20 crore was not mandatory, around 65% of such trades were settled by CCIL. However,
with effect from April 2003, it was made mandatory for all trades in Government Securities to
be settled through CCIL, irrespective of the value. CCIL switched over to the DVP III mode
of settlement since April 2, 2004. CCIL facilitates clearing and settlement of all secondary
market transactions in Government securities, both, outright and repo transactions dealt on the
NDS-OM and CROMS. CCIL has introduced Multi Module Settlement Banks (MMSB) module in
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June 2008 thereby facilitating funds settlement in the Books of Settlement Banks for those NDS
members who are not permitted to settle funds leg of the secondary market Government Security
transaction in RBI Current/RTGS Settlement Account. The final settlement is achieved at the
concerned department of RBI i.e. Public Debt Office for SGL transfers and Deposits Account
Department Mumbai for funds settlement. The settlement is achieved in DVP III mode viz.,
funds are netted across all securities trades and securities are netted for each member for their
SGL/CSGL account and within each SGL/CSGL, for each ISIN. CCIL guarantees settlement of
trades and is the central counter-party to every trade. Following the consolidation of the various
internal systems at RBI, there was a gradual shift during 2012-13 to the Core Banking Solution
implemented at RBI. Funds settlement has shifted to CBS from June 14, 2012 and Securities
Settlement shifted to CBS from October 28, 2012 onwards. The inception of guaranteed clearing
and settlement of government securities along with multilateral netting has not only brought
down the liquidity requirements of the market substantially and reduced the gridlock situations,
but also mitigated risk for market participants and enabled RBI to push further reforms such as
facilitating short-selling, repo rollovers, When Issued market etc.
2. Money Market
Overcoming the limitation of the traditional repo, CBLO facilitates unwinding of both borrowing
and/or lending positions before maturity and also substitution of security during the tenure of the
CBLO. It also does not entail physical transfer of respective securities from borrower to lender
or vice versa. CBLO settlements are guaranteed by CCIL as the central counterparty. CBLO
operates in a STP enabled environment seamlessly encompassing dealing to settlement.
Clearcorp Repo Order Matching System (CROMS), an STP enabled anonymous Order Matching
Platform was launched on January 27, 2009 to facilitate dealing in Market Repos in all kinds
of Government Securities. It enables dealing in two kinds of Repos (1) Basket and (2) Special
Repos. Since its introduction, trading in the repo market has shifted to the CROMS platform
and now constitutes almost 90% of the total repo trading volumes. The Platform also enables
securities lending and borrowing through its Special Repo Facility. Market Repo on STRIPS has
been enabled on the CROMS trading platform. Since April 2013, all OTC repo deals are being
reported on the CROMS platform.
3. Forex Segment
The settlement of Forex transactions started from November 8, 2002. This segment accepts
the inter-bank Cash, Tom, Spot and Forward USD-INR transactions for settlement through a
process of multilateral netting. CCIL guarantees settlement of such trades and offers banks
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the benefits of settlement efficiency, considerable reduction in settlement and operational
risk, reduction in intra-day liquidity requirements and savings on settlement costs. CCIL also
undertakes certain foreign exchange transactions both to facilitate settlement and in its capacity
as a custodian of the settlement guarantee fund. The Corporation has therefore been granted
an Authorized Person License under FEMA 1999 by the Reserve Bank of India for conduct of
foreign exchange clearing and settlement operations and activities related thereto.
The company commenced the settlement of forex forward trades with guarantee from the trade
date on December 1, 2009. In this segment all matched forward trades with a residual maturity
of upto 13 months are eligible for guarantee. Legal novation occurs at the point in time when the
trade is accepted for guaranteed settlement by CCIL.
CCIL has started the settlement of cross-currency deals through the CLS Bank from April 6,
2005. Through this, CCIL aggregates trades reported by all Member Banks and enables banks
to collectively enjoy the benefits of cross currency settlement through CLS Bank. This is a
unique experiment whereby settlements of an entire country are being achieved through a third
party arrangement. The scope of services offered also goes beyond that available in CLS in-as
much-as early payouts are facilitated in select currencies within the regular market hours of the
respective currencies.
4. Derivatives
CCIL launched the trade reporting platform for Rupee Interest Rate Swaps (IRS) and Forward
Rate Agreements on August 30, 2007. This trade reporting platform can be used by members
to report their deals to CCIL. The instruments covered for trade reporting on this platform are
Interest Rate Swaps, Fixed Float and Basis Swaps (Upto maximum maturity of 10 years) and
Forward Rate Agreements with maximum maturity of 10 years. Besides providing an automated
central trade processing infrastructure, CCIL also extends post-trade processing services like
interest rate reset, holiday handling, tracking payment obligation of members on their outstanding
contracts etc. CCIL has commenced multilateral net settlement of cash flows arising from Interest
Rate Swaps (IRS) trades on Non-guaranteed basis from November 27,2008. CCILs non-
guaranteed settlement offers multi-lateral netting benefit to members, reducing in a significant
manner the liquidity requirement for settlement and also improving the operational efficiencies.
CCIL also proposes to commence shortly the guaranteed settlement for select benchmarks in
IRS which is expected to provide significant benefits to members including capital reduction,
counterparty risk reduction etc. besides offering liquidity and operational efficiencies.
CCIL has launched a Trade Repository for Credit Default Swaps on December 01, 2011.
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Trades concluded in CDS market are reported to CCIL through CCILs Online Reporting Engine
(CORE), an on-line electronic reporting platform developed by CCIL. The repository facilitates
reporting of trades concluded between two market makers and also between a market maker
and its client. Currently, the repository provides post-trade processing services covering trade
amendments, cancellations and early terminations. The services also cover coupon computation
and succession event handling.
Acting on RBIs mandate that all inter-bank OTC foreign exchange derivatives and all/selective
trades in OTC foreign exchange and interest rate derivatives between the AD categoryI banks/
market makers (banks/PDs) and their clients should be reported on a platform to be developed by
CCIL, it launched a Trade Repository for the reporting of all inter-bank OTC USD-INR forwards,
FX swaps and FCY-INR options on July 9, 2012. The second phase covering all FCY-INR and
FCY-FCY Forwards and Swaps and FCY-FCY Options was operationalised with effect from
November 5, 2012. Reporting arrangement covering OTC foreign exchange derivative trades
between ADs and their clients has been operationalised with effect from April 02, 2013.
Since July 2011, CCIL has started Portfolio Compression for non-cleared Interest Rupee Swap
(IRS) trades of its members. This exercise in the OTC Interest Rate Swaps market is aimed at
reducing the overall notional outstanding and the number of outstanding contracts by identifying
economically redundant trades for early termination. The fourth cycle of this exercise conducted
in March 2013 resulted in a compression of 85.28% of the trades eligible for compression.
The activities in the various market segments are supported by:
1. Risk Management
Risk Management is now recognized as the most important objective for which settlements are
routed by market participants through Central Counterparties (CCPs). CCPs are increasingly
being treated as Systemically Important and there is huge focus on the robustness of CCPs. For
CCPs, risk management function is therefore assuming maximum importance.
CCIL offers guaranteed settlement of trades in Securities, Forex and CBLO segments and is in the
process of offering guaranteed settlement for OTC derivative trades also. The risks arise mainly
on account of settlement failures due to default by counterparties. In case of Derivative trades,
inability to meet day to day margin requirements by the members may also pose considerable
risk. CCIL seeks to manage these risks through appropriate valuations of positions/trades and
collection of margins so that the ultimate risks to its members are either eliminated or reduced
to the minimum.
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Risk Management processes are designed in a manner such that the margining process remains
efficient and risk-based. Moreover, while designing the processes, due care is also taken to
address segment specific issues. For instance the nature of risks associated with Clearing &
Settlement process for the Securities Segment is different from the risks associated with the
Forex settlement segment. In the former, CCIL is exposed only to market risk, while in the
latter the exposure is mainly in the form of credit risk. In case of CLS settlement, CCIL does not
become a Central Counterparty to the trades but manages settlement related risk within the CLS
settlement parameters by setting exposure limits duly supported by collaterals. Margining and
risk control processes are therefore different for each of these segments.
Risk Management Department is also responsible for ensuring that all these processes are
carried out in an efficient manner. In 2009-10, CCILs risk processes and models including the
one for centralized clearing of derivative products were vetted by Professor J. R. Varma of Indian
Institute of Management, Ahmedabad who incidentally headed the J. R. Varma Committee for
Risk Management of Derivative Products in Equity Market in 1998 and recommended the model
for risk management in that market. He found CCILs risk processes to be efficient on an overall
basis. The review of CCILs Risk Management processes and models was again carried out by
Prof. P J Apte and his team from IIM, Bangalore in 2013. They also found the processes and
models to be robust and efficient.
2. Membership Department
The department accepts requests for membership from eligible institutions, admits them as
Members/Associate Members after completion of the legal and documentation formalities,
initiates activation of members before commencement of their dealing with CCIL and engages in
an ongoing tracking of members performance and review of CCILs membership. The department
also carries out periodically, a Membership Review in respect of all the members to ensure their
continued adherence to the prescribed membership eligibility norms of the respective business
segment and initiates disciplinary action against the non-conforming members.
3. Operations Fixed Income & Money Market
The department provides a dedicated help desk for CBLO Dealing System and attends to the
functional queries received from members. The department is also responsible for CBLO and
Securities settlement. Roles and responsibilities of the department include Securities and CBLO
Settlements on multilateral netting basis. The Securities Line of Credit, its review and seeking
replacement of securities are also done by the department.
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4. Collaterals and Funds Management Segment (CFM)
The department acts as CCILs in-house custodian and accepts/refunds, maintains and services
the margin/collateral contributions received from members across the various business segments.
During the year 2006-07, the Department introduced a web-based interactive electronic eNotice
system for all its Members and Associate Members which enables them to send the collateral
related notices in electronic form and on-line tracking of acceptance/confirmation of such notices
by CCIL. The eNotice system of CCIL, which is the first of its kind, immediately found favour
from its members as it avoids hassles of paper based notice system and almost all of the notices
are now being received through the eNotice system only.
The CFM Segment ensures optimal management of liquidity at CCIL for settlement purposes. As
the in-house fund manager of the Company, the Department manages the investment of all INR/
USD cash collaterals/SGF contributions including Settlement Reserve Fund and Default Fund.
CCIL has been a member of RTGS, which facilitates receipts and payments from proprietary
account and MNSB settlements through CBS. One of the main functions is to ensure all rupee
funds settlements across various segments of CCIL using the CBS provided by Reserve Bank
of India. Further, management of Lines of Credit at Settlement Bank and RBI to take care of
liquidity requirement is another important function. The Lines of Credit Management covers
procuring new Lines of Credit, if required and allocation of existing Lines of Credit among various
business segments. Renewal of existing Lines of Credit is also handled by this Department.
The Department also monitors defaults in INR and US Dollar settlements and follow up for
replenishment with charges. Since the operationalization of Core Banking Solution at RBI, since
June 14, 2012, the settlement MNSB files for CCILs Derivatives, Forex, CBLO and Securities
Segments migrated to the CBS of RBI from RTGS. In the second phase, Securities Settlement
shifted to CBS from October 28, 2012 onwards.
5. Research and Surveillance
The Research and Surveillance Department aims to act as the external interface to support
market operations by leveraging the informational content available with CCIL due to its pivotal
role in the settlement operations in the Indian fixed income and forex market. It focuses on
and undertakes research activities that help participants as well as other stake holders and
academicians. CCIL has launched the online certification programme, the CCIL Certification
Programme (CCP) to assess the theoretical and practical application of participants in the fixed
income and forex market. The Surveillance system aims to give suitable indicators (trigger
points) for the detection of potential abnormal activity that might expose the company to any
additional risk while protecting the interests of members. The Department also prepares
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daily, weekly, fortnightly and monthly surveillance reports on the money and G-Sec markets
for the RBI.
It releases data on a daily basis on the website of the company as well as to leading infovendors
so that the market can be kept up-to-date with statistics pertaining to the government securities,
money, derivatives and forex markets. Other than the syndicated research reports that CCIL
churns out on a weekly and monthly basis, it also caters to specific data requirements from all
its members. Daily, weekly, monthly, quarterly and annual reports tracking the various segments
of the financial market and brief updates on macro-economic indicators are also released on
the CCIL website. Banks and other financial institutions have benefited immensely from CCILs
publications. It has been CCILs constant endeavor to disseminate data for effective use by
market participants, academics and others.
6. Information Technology
CCILs business operations are backed by its Information Technology infrastructure. CCIL
has built and manages three state-of-the-art datacenters, two in Mumbai and one in Pune. All
these data centers are built as per international Tier 3+ standard to support high redundancy
and availability of compute resources. Presently, the Primary datacenter is at Dadar, Mumbai,
the Near site datacenter is at Kurla, Mumbai and Far site datacenter (DR) is at Baner, Pune.
These datacenters host critical IT infrastructure comprising of hardware, software, security/
network equipment, communication links etc. CCIL has established its own backbone network
connecting all the above mentioned locations/sites. CCIL is a member of the INFINET MPLS
network. CCILs members use INFINET to connect to the datacenters for business operations.
The in-house IT department performs the activities related to Infrastructure management like,
project management, system/database/network administration, help-desk support, 24x7 data
center operations and business continuity management. The department is also engaged in
development and maintenance of software for various business requirements of CCIL like,
MIS reports, eNotice, eSupport, Datafeed to info vendors, reporting platform for FIMMDA,
Datawarehouse, CCIL website etc. The department has been managing the software development
activities outsourced to vendors namely, M/s. Tata Consultancy Services and M/s. NSE.IT Ltd.
All important technology decisions that have an impact on overall operations/IT are vetted by the
Technical Approval Committee, a committee of Board.
IT department is instrumental for achieving the internationally recognized ISO 27001 certification
for information security of CCIL/ClearCorp operations. IT department maintains various Policies
and Procedures related to Information Security. The department also conducts regular training/
awareness to employees and onsite consultants on IS Security Policies/Procedures.
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7. Product Development Department
Product Development Department (PDD) has been instrumental in introducing innovative trading
platforms for the Fixed Income and Money Markets. Under the RBI NDS Hive Off Initiative, PDD
had developed the NDS-OM, NDS-CALL and NDS Auction systems. NDS-OM is an anonymous
order matching system for secondary market trading in government securities providing real
time trade information with STP linkages to CCIL. NDS-CALL is a screen based negotiation
system catering to the Call, Notice and Term Market. As part of its own initiative for the Money
Markets, PDD had developed the CROMS (Clearcorp Repo Order Matching System) for dealing
in market repos in government securities. It has also introduced a web based system e-Support
to provide electronic business support to Members of the systems managed by Clearcorp NDS
Operations (CNO). PDD has also developed the F-TRAC platform in Decmber 2011 as an
integrated system for Reporting of secondary market trades in CD, CP, Corporate Bond and
Corporate Bond Repo Segment. For all the projects, PDD is involved in the management of
the developmental activities throughout the entire cycle of the respective project(s) i.e., from
conceiving, designing, firming up business requirements, engaging with software vendors for
developing, user acceptance testing, roll out and implementation of the respective systems.
Post launch, it oversees the hosting of the systems through CNO. Product enhancements and
change management for the respective systems are also looked after by PDD.
8. Clearcorp NDS Operations
Clearcorp NDS Operations (CNO) has been set up to manage all operations pertaining to the
hosting, maintenance and administration of the various systems developed and run by Clearcorp
Dealing Systems (I) Ltd on behalf of RBI/FIMMDA as well as its own systems. Presently under
the RBI NDS Hive Off arrangement, CNO manages operations pertaining to the NDS-OM and
the NDS-Call systems. CNO also manages the CROMS system developed by Clearcorp. On
behalf of FIMMDA it manages the Corporate Bond Repo Reporting Platform. For providing
operational assistance to Members of the various systems, CNO runs the e-Support system.
CNO is the interface to Members and provides important feedback about Member expectations
and functions of the various systems. CNO also supports PDD in the development and testing
of various systems.
9. Support Services
Support Services Department functions can be segregated into four sub-sections:
a. Finance and Accounts: The Department maintains Accounts of the Company and looks
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FACT BOOK 2013
after financial and taxation matters of the Company. It also ensures statutory compliance
in respect of all relevant tax laws.
b. Secretarial & Legal: The Secretarial Department is a link between the Board of Directors
and the Shareholders. Its functions include maintaining various Statutory Registers and
ensuring compliance of various Statues applicable to the Company. The Legal Department
provides necessary legal inputs for the various functions of the Company, provides necessary
legal framework for the Operations of the Company and interacts with Statutory Authorities
on behalf of the Company and Statutory authorities/solicitors wherever required.
c. Human Resources Department: Human Resources Development is another integral
part of the department that designs and implements various HR systems and policies
in the areas of Manpower Planning, Recruitment, Placement, Performance Appraisal,
Remuneration Package, Promotion and Career Planning and Development etc. It also
ensures all statutory compliances with the relevant labour laws.
d. Administration: General Administration function takes care of all utility services required
for the smooth running of the company, including supervision of the maintenance of
Premises of the Company etc.
10. Regulatory Interface
CCILs policies and performance in the context of its role as central counterparty in the clearing
and settlement are assessed by the Reserve Bank of India. Various reports from all operational
segments are sent periodically and exceptional reports immediately. All external/business
matters concerning CCIL are subject to clearance by RBI prior to its implementation. Since
CCIL is a corporate entity, it is required to conform to the standards laid out in the Companies
Act, 1956.
11. User Groups
As part of our corporate governance policy, all major initiatives undertaken by us in each of the
Segments is done in consultation with the main market participants of the respective segment. To
this end CCIL has set up various User Groups to receive feedback from the users for designing
and for effecting improvements of its products and systems. This is a continuous process and
regular meetings of user groups helps in enhancing the effectiveness of CCILs operations.
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FACT BOOK 2013
12. COMMITTEESOF THE BOARD
1. Audit Committee
Member: Mr. Y H Malegam, Director, Mrs. Shyamala Gopinath, Chairperson,
Mr. S Venkiteswaran, Director, Mr Pundarik Sanyal, Director and Mr M R Ramesh, Director.
2. Committee of Directors for Bye-laws, Rules and Regulations
Member: Mr. R. Sridharan, Managing Director, Mrs Shyamala Gopinath, Chairperson,
Mr. M R Ramesh, Director and Mr. S Venkiteswaran, Director.
3. Committee of Directors on HR, Personnel and Organisational matters
Member: Mrs. Shyamala Gopinath, Chairperson, Mr. R Sridharan, Managing Director,
Mr. S Venkiteswaran, Director and Mr. M R Ramesh, Director.
4. Committee of Directors on Risk Management
Member:: Mrs. Shyamala Gopinath, Chairperson, Mr. R Sridharan, Managing Director,
Mr. M R Ramesh, Director, Mrs. Shilpa Kumar, Director and Mr. Bhavesh Zaveri, Director.
5. Technical Approval Committee
Member: Dr. N L Sarda, Director, Mrs. Shyamala Gopinath, Chairperson, Mr. R. Sridharan,
Managing Director, Mr. M R Ramesh, Director.
Special Invitees: Dr. G Sivakumar, Professor, IIT, Mumbai, Dr. UpendraRao, Jt. Director,
SBI-IICM, Hyderabad.
6. Nomination Committee of Directors
Member: Mr. Y H Malegam, Director and Mrs. Shyamala Gopinath, Chairperson.
7. Committee of Directors for CSR Activities
Member: Mr R Sridharan, Managing Director and Mr Pundarik Sanyal, Director
OTHER COMMITTEES
The Company has set up some external committees with personnel from different fields to bring
about greater transparency and efficiency in the decision making process relating to certain core
areas of its operation.
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FACT BOOK 2013
1. Premises Advisory Committee
Member: Mr. R Sridharan, Managing Director, Mr M S Sundara Rajan, Director, Mr. B D Sumitra,
Ex Managing Director of CCIL, Mr. C B Gokhale, Retd. ED Buildings, LIC, Mr. Shashikant Tambe,
Retd. Secretary (Roads), Public Works Dept., Government of Maharashtra, Mr. Prabhakar
Ambike, Retd. Chief Engineer, The City and Industrial Development Corporation of Maharashtra
(CIDCO), Government of Maharashtra.
PRODUCTS IN THE PIPELINE
Guaranteed Settlement of Rupee Derivatives Contracts
In view of the new changes in regulatory requirements, proposed CCP clearing of OTC trades
in rupee derivatives is being reviewed by Reserve Bank again. A clearance is expected in the
next 3 to 6 months time.
Trade Repository
The coverage of the Forex Derivative TR is proposed to be expanded to cover currency swaps
and rate swaps denominated in foreign currency, as well as client trades in INR denominated
rate swaps by the third quarter of 2013.