>  Clearing and Settlement of Debt Securities
Clearing and Settlement of Debt Securities
India International Clearing Corporation (IFSC) Limited (India ICC) undertakes clearing and settlement of debt securities traded / reported at the India International Exchange (IFSC) Limited (India INX)

A) Participant / Custodian / Clearing member details

All participants (investors), clearing members / custodians (entity settling the reported trade of the participants in case the participant themselves are not settling it) are required to register themselves for clearing & settlement. Registration form and undertaking which Participant / Custodians need to forward to the India ICC are enclosed as Annexure I and Annexure II. Participants /Custodians are required to mention all the details in the form / undertaking and email a scanned copy to : icc.cs@indiaicc.com and send the original by courier at the following address :

Head – Operations
India International Clearing Corporation (IFSC) Limited
1st Floor, Unit No. 102
The Signature
Building no. 13B, Road 1C, Zone 1, GIFT SEZ,
GIFT City, Gandhinagar – 383255
Gujarat
India


B) Clearing & Settlement of trades reported on Global Securities Market platform of India INX (OTC trades)

  • The clearing and settlement for OTC trades would be conducted by India ICC.
  • All the Participants who report trades and Custodians (entity settling the trade in case the participant themselves are not settling it), on the Global Securities Market platform of India INX, will need to fill up annexures (Annexure I and II) and forward them to India ICC.
  • Only Participants registered with India ICC will be able report trades on India INX and they or their Custodians settle trades through India ICC.
  • Participant can report trades only after receiving confirmation of registration by India ICC.
  • All participants of the Global Securities Market platform or their custodians shall have a securities account with either Clearstream Banking SA (Clearstream) or Euroclear Bank (Euroclear) to be able to report and settle the trades.
  • The settlement of securities / funds would be only through the Participants / Custodians who have a securities account with Clearstream / Euroclear and have provided their securities account / bank account details along with their undertakings.
  • Participants would have to bear a fee of USD 50 for their side of the trade reported.

The salient features of the clearing & settlement process for trades reported on Global Securities Market platform of India INX would be as follows:
  • Once a trade has been reported on the Global Securities Market platform, the buyer will need to transfer the necessary funds (value of the trade plus fees of USD 50) to India ICC's Clearing Bank account (details will be provided at the time of registration) and the seller will need to transfer securities to India ICC's account with Clearstream (details will be provided at the time of registration).
  • Funds pay in for session I should be credited to correspondent bank of settlement bank of India ICC by EOD of nostro on same day.
  • Funds pay in for session II should be credited to correspondent bank of settlement bank of India ICC by 12:00 PM IST on the same day
  • Funds pay in should be confirmed over email to India ICC by buyer by sending copy of remittance message (MT 103/ MT 202) within 30 minutes of such payment. The email id to which this message should be sent is icc.cs@indiaicc.com.
  • India ICC will instruct Clearing Bank to transfer funds (value of the trade less fees of USD 50) to seller's bank account (as per details mentioned in Annexure I)
  • India ICC will instruct Clearstream to transfer securities to buyer's account (as per details mentioned Annexure I)
  • In case any of the legs, whether securities or funds remains undelivered by any of the parties, the settlement would stand annulled and the securities / funds returned to the respective party.
  • Trades would be settled on a gross basis on T+1 day.


Settlement Guarantee

  • No settlement guarantee


Timings for Clearing & Settlement of trades reported on Global Securities Market platform of India INX (in Indian Standard Time)



Trading Settlement
Type

Settlement type /
Securities Settlement timing

Settlement type /
Funds Settlement timing

Business Date
(example)
Session
No.
Trading session
Timeline
  Pay-in
Timings
Pay-out
Timings
Pay-in
Timings
Pay-out
Timings

18/09/2017

1

4:30:00 Hrs. to
17:00:00 Hrs. (18/9/2017)

T + 1

By 9:00 Hrs.
(19/9/2017)

By 9:45 Hrs.
(19/9/2017)

By 9:00 Hrs.
(19/9/2017)

By 9:45 Hrs.
(19/9/2017)

18/09/2017 2

17:00 Hrs. (18/9/2017) to
23:55 Hrs. (18/9/2017)

T + 1

By 16:00 Hrs.
(19/9/2017)

16:45 Hrs.
(19/9/2017)

By 16:00 Hrs.
(19/9/2017)

16:45 Hrs.
(19/9/2017)


C) Clearing & Settlement of exchange traded debt securities

The clearing and settlement for exchange traded debt securities would be conducted through the Clearing members of the India ICC. All participants or their custodians (entity which will settle the trades) shall have securities account with either Clearstream Banking S. A. (Clearstream) or Euroclear Bank (Euroclear) to be able to clear and settle the trades. Clearing members are required to submit Annexure I and II to India ICC by filling the necessary details as a Participant.


The details of trading & settlement timings, funds settlement and securities settlement are mentioned below :-


Trading Download
of files

Securities Settlement

Funds Settlement

Business Date
(example)
Session
No.
Trading session
Timeline
Download of settlement
files to members / Banks

Pay-in
(Delivery)
Timings

Pay-out
(Receipt)
Timings

Pay-in
(Delivery)
Timings

Pay-out
(Receipt)
Timings

18/09/2017

1

4:30:00 Hrs. to
17:00:00 Hrs. (18/9/2017)

By 18:00 Hrs.
(18/9/2017)

By 9:00 Hrs.
(19/9/2017)

By 9:45 Hrs.
(19/9/2017)

By 9:00 Hrs.
(19/9/2017)

By 9:45 Hrs.
(19/9/2017)

18/09/2017 2

17:00:01 Hrs. (18/9/2017) to
2:30:00 Hrs. (19/9/2017)

By 3:30 Hrs.
(19/9/2017)

By 16:00 Hrs.
(19/9/2017)

6:45 Hrs.
(19/9/2017)

By 16:00 Hrs.
(19/9/2017)

16:45 Hrs.
(19/9/2017)


Funds Settlement

  • The pay-in and pay-out of funds would be conducted through designated Clearing Banks based on the funds obligations of the Clearing Members of India ICC.
  • The obligations of the Clearing Members would be generated by India ICC on T day and downloaded to the Clearing Members.
  • The funds settlement would be on a gross basis for the Clearing Member.
  • Clearing Members at the IFSC are required to maintain and operate a settlement account with any one of the designated Clearing Banks. Clearing Members who have an existing account with the Clearing Banks can use their existing accounts with the Clearing Banks for funds settlement in debt securities. Clearing Members shall maintain clear balance of funds in their settlement accounts with their designated clearing banks towards their funds obligations to India ICC.
  • The Clearing Banks shall debit/credit the settlement accounts of Clearing Members as per instructions received by them from India ICC from time to time.
  • Clearing Members will be informed of their funds obligations for various settlements through the daily clearing data download.

Funds pay-in shortages

In case of non-fulfilment of funds pay-in obligations pertaining to normal pay-in within stipulated time to India ICC, it will be treated as a violation and/ or non-performance of obligations and will attract late fees / fines / penalties or such disciplinary action as may be specified from time to time.

Securities Settlement

  • In order to settle trades, a Clearing Member or its custodian would need to have an account with International Central Securities Depositories (ICSDs) such as Clearstream / Euroclear.
  • The obligations of the Clearing Members would be generated by India ICC on T day and downloaded to the Clearing Members
  • The Clearing Member or its custodian's account at Clearstream / Euroclear would be used by the Clearing Member / custodian to receive and deliver all securities. The trading member / investor would be required to ensure timely delivery of securities to the ICSD's account of the Clearing Member well in advance of pay-in day.
  • The Clearing Member / custodian will ensure timely transfer of all securities for pay-in into India ICC's account with Clearstream from their account in Clearstream / Euroclear.
  • The securities pay-out will be initiated by India ICC by instructing Clearstream to credit the ICSD account of the Clearing Members / custodians who are to receive the securities.
  • Securities settlement would be on a gross basis.

Close-out of securities

The close-out of settlement shortages would be cash settled on T + 1 at the traded price + 5%.

Settlement Guarantee

No settlement guarantee for the exchange traded debt securities.

Margin system for debt exchange traded platform

Clearing members would need to have available upfront margins of 10% of the value of the trade at the time of execution of the trade and the margins would be adjusted against the member's liquid assets.


D) Clearing and settlement of debt securities through Custodians


An additional feature of clearing and settlement of debt securities is given below :

1) Appointment of Custodians

Participant or trading member desirous of transacting in the debt securities listed on the India INX shall be required to enter into necessary arrangements and maintain accounts with custodians registered in India or global custodians registered in a Financial Action Task Force (FATF) member jurisdiction for the purpose of holding debt securities.

1.1) A trading member, who is transacting or reporting in its proprietary account, or a participant of reporting platform in the debt securities listed on India INX, shall be required to submit following documents to India ICC :



  • Request letter from trading member or client, authorizing Custodian to settle deals executed on India INX. Format of the letter is attached as Annexure III.
  • Letter from Custodian confirming clearing and settlement of debt securities. Format of the letter is attached as Annexure IV.

1.2) A trading member, who is transacting or reporting on behalf of its clients, in the debt securities listed on India INX, shall be required to request for a custodial participant code by submitting the following documents :


  • Request letter from trading member for issuance of Participant Code. Format of the letter is attached as Annexure III.
  • Request letter from trading member, activating/deactivating/ modification of Custodian to settle deals executed on India INX. Format of the letter is attached as Annexure V.
  • Letter from Custodian confirming clearing and settlement of debt securities. Format of the letter is attached as Annexure IV.

2) Clearing and Settlement of deals

The trades shall be settled on a trade-for-trade basis. The information relating to obligations arising out of each trade shall be communicated to the custodians of the respective market Participant / trading member by India ICC. India ICC shall provide the settlement details to custodian as per Annexure VI.

3) Settlement mechanism

The settlement of the trades shall require to be performed by the custodians on a T+1 basis. For carrying out the settlements, the custodians shall use the delivery-versus-payment mechanism provided by the ICSDs with whom the issuer of the debt securities has entered into necessary arrangement. The custodians shall be required to report the status of settlement to the Clearing Corporation on T+1 by IST 21.00 Hrs. Format for confirmation of settlement is attached as Annexure VII.

There shall be no settlement guarantee and margin requirement for the deals reported or trades executed on Exchange platform.

In case of trades executed on Exchange platform, failure to complete settlement shall be treated as a violation and India ICC will levy penalty of 0.07% of value of reported deal. Members are advised to take note of above.

Annexure