To thwart any systemic risk from default of brokers or trading members, SEBI has decided to give the top priority to the claims of stock exchanges and clearing corporations over collaterals, deposits or margins of such defaulter entities.

The Securities and Exchange Board of India (SEBI) has notified amendments in its regulations for stock exchanges and clearing corporations, which are considered among the entities with highest systemic importance in the capital markets.

While stock exchanges provide platform for trading in securities, the clearing corporations ensure orderly settlement of transactions and payments for the trades.

The amended regulations also provide a sound legal basis for ‘netting’, as also for the settlement finality (point of time after which a settlement is final and irrevocable), besides giving the first right over collaterals to the stock exchanges and clearing corporations, SEBI said in a notification dated September 2.

“...right of recognised stock exchange or the recognised clearing corporation, as the case may be, to appropriate any collaterals or deposits or margins contributed by the trading member, clearing member or client towards its settlement or other obligations shall take priority over any other liability of or claim against the said trading member, clearing member or client, as the case may be,” SEBI said.

The notification follows amendments that were approved in SEBI’s boad meeting in June.

Payment and settlement in respect of a transaction in a stock exchange and clearing corporation would be determined in accordance with the ‘netting’ or gross procedure specified by such entities with the prior approval of SEBI.

These payment and settlement would be final, irrevocable and binding on such parties, the regulator noted.

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