The Securities and Exchange Board of India (SEBI) has announced the guidelines for interoperability of clearing corporations – an issue that was under discussion for many years. Such interoperability is expected to bring down the compliance costs for market intermediaries and thereby the trading costs as well, which are among the highest in the world.
Interoperability among clearing corporations refers to the linking of multiple clearing corporations, which effectively allows market participants to consolidate their clearing and settlement functions at a single clearing corporation, irrespective of the stock exchange on which the trade is executed.
In a circular issued on Tuesday, the capital market regulator said that all the products available for trading on the stock exchanges except commodity derivatives would be made available under the interoperability framework.
The watchdog has directed all clearing corporations to establish peer-to-peer link for ensuring interoperability. Further, clearing corporations will have to maintain sufficient collateral with each other so that any kind of default would be covered without risking financial loss to the other clearing corporations.
“It is expected that the interoperability among clearing corporations would lead to efficient allocation of capital for the market participants,” said the circular.
