SEBI Allows Clearing Corporations At IFSCss To Accept Cash And Cash Equivalents

Background:

In furtherance of detailed guidelines for International Financial Services Centres (hereinafter referred as 'IFSC'), released on March 27, 2015,¹ for facilitating and regulating financial services relating to securities market in an IFSC, the Securities and Exchange Board of India (hereinafter referred as 'SEBI') vide circular² dated November 28, 2016, has clarified the position regarding the acceptance of bank guarantees by Clearing Corporations in IFSCs. As per the said circular, SEBI has now allowed Clearing Corporations located at IFSCs to accept cash and cash equivalents as trade collateral.

Eligible collateral:

SEBI has clarified that for the purposes of eligible collateral for trades in all product categories, the Clearing Corporations located in IFSCs shall be permitted to accept the following:

1. Cash and cash equivalents;

2. Indian securities held with foreign depositories;

3. Foreign securities including units of liquid mutual funds; and

4. Gold.

Also, SEBI has stated that regarding acceptance of cash and cash equivalents, the Clearing Corporations may accept foreign currencies as may be decided by them from time to time, term deposit receipts and bank guarantees issued by banks located in IFSC. Further, SEBI has also clarified that cash and cash equivalents shall form at least half of the total liquid assets at all times.

Mandatory steps to be taken by Clearing Corporations:

a) Essential actions for putting in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations;

b) Bringing this circular to the notice of their members and also disseminate the same on its website; and

c) Informing SEBI about the status of implementation of this circular in the Monthly Report.

Footnotes

1 Refer: https://www.sebi.gov.in/legal/guidelines/mar-2015/sebi-international-financial-services-centres-guidelines-2015_29457.html.

2 Refer: https://www.sebi.gov.in/legal/circulars/feb-2018/acceptance-of-bank-guarantees-by-clearing-corporationsin-international-financial-services-centre-ifsc-_37906.html.

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