Guidelines for functioning of Stock Exchanges and Clearing Corporations in International Financial Services Centre (IFSC)
Summary
This circular establishes the broad framework for the functioning of stock exchanges and clearing corporations in the International Financial Services Centre (IFSC). It mandates a single market structure with specific trading hours, settlement frequencies, and eligible product categories including Masala Bonds. The document outlines strict risk management requirements, ring-fencing protocols, collateral standards, and dispute resolution mechanisms for IFSC entities.
Text
There shall be a single market structure to achieve synergies in terms of various operations and to facilitate ease of doing business.
The trading hours for all product categories shall be as decided by the stock exchanges in IFSC based on cost-benefit analysis, but not exceeding 23 hours and 30 minutes in a day and settlement shall be done at least twice a day.
All categories of exchange-traded products as available for trading in stock exchanges in FATF/IOSCO compliant jurisdictions shall be eligible for trading, subject to prior approval of SEBI. However, with respect to commodity derivatives, only non-agri commodity derivatives shall be eligible for trading.
Stock exchanges in IFSC shall evolve a detailed framework for the applicable position limits for each product to be traded.
Masala Bonds shall be eligible for trading in stock exchanges in IFSC, provided such bonds are listed on stock exchanges in FATF/IOSCO compliant jurisdictions.
Prior to commencement of their operations, stock exchanges in IFSC shall tie-up with Clearing Corporations for clearing and settlement of their trades. The Clearing Corporations desirous of providing clearing and settlement services in IFSC shall evolve a robust risk management framework in line with the CPMI IOSCO Principles for Financial Market Infrastructures (PFMIs).
Clearing Corporations in IFSC shall evolve a margining framework based on the best practices prevailing in the Clearing Corporations globally. However, Clearing Corporations shall be required to conduct stress tests, reverse stress tests, back testing, liquidity stress testing, etc. to ensure the robustness of risk management framework.
Clearing Corporations at IFSC shall be ring fenced down to the lowest level and their functions shall be limited only to clearing and settlement, and risk management.
The capital of clearing corporations in IFSC shall not form part of the net worth of their holding companies. Additionally, holding companies shall not be allowed to extend any financial help to Clearing Corporations operating in IFSC, if such Clearing Corporations become financially distressed.
Clearing corporations in IFSC shall be permitted to accept cash and cash equivalents... Indian securities held with foreign depositories, foreign securities including units of liquid mutual funds and gold, as eligible collateral for trades in all product categories.
However, cash and cash equivalents shall form at least 50% of the total liquid assets at all times.
Clearing corporations in IFSC shall establish and maintain a Fund to guarantee the settlement of trades executed in the stock exchanges in IFSC. To begin with, such Fund shall have a corpus equivalent to at least 10% of the net worth of the clearing corporation.
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Source: SecMarx — Guidelines for functioning of Stock Exchanges and Clearing Corporations in International Financial Services Centre (IFSC). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.