Investment Policy, Liquid Assets for the purpose of Calculation of Net Worth of a Clearing Corporation and Transfer of Profits
Summary
This circular mandates Clearing Corporations to align their investment policies with principles of safety and low market risk, restricting investments to specific fixed deposits, government securities, and debt mutual funds. It defines eligible liquid assets for calculating the net worth of a Clearing Corporation, including cash, bank balances, and specified instruments. Additionally, it outlines procedures for transferring profits from Stock Exchanges to the Core Settlement Guarantee Fund and refunding excess contributions.
Text
The investment policy of the Clearing Corporation shall be built on the premise of highest degree of safety and least market risk. The investments shall be broadly in Fixed Deposits/ Central Government Securities and Liquid schemes of Debt Mutual Funds.
Fixed Deposit with Banks [only those banks which have a net worth of more than INR 500 crore and are rated A1 (or A1+) or equivalent, as mentioned at para 12 of SEBI circular dated August 27, 2014];
Investment in liquid scheme of debt mutual funds shall not exceed a limit of ten per cent of the total investible resources held by the clearing corporation, at any point in time.
In case the Clearing Corporation has investments in mutual funds beyond the limits specified above, then such excess investments shall be liquidated by the Clearing Corporation within six months from the date of issuance of this circular. Fresh investments by the Clearing Corporation beyond the threshold limit prescribed above are not permitted.
The eligible instruments for investment such as fixed deposits, Central Government Securities and liquid schemes of Debt Mutual Funds to the extent permissible, other instruments as may be specified by SEBI from time to time, and cash and bank balance, shall be considered as 'Liquid Assets', for the purpose of calculation of Net worth of a Clearing Corporation.
The provisions made by Stock Exchanges in their books of accounts towards the requirement of 'Transfer of Profits' under Regulation 33 of SECC Regulations 2012, from the date the SECC Regulations, 2012 came into effect till March 31, 2015, shall be transferred to the Core SGF maintained by Clearing Corporations within one month from the date of issuance of this Circular.
After such transfer of funds from the Stock Exchange to the Core SGF maintained by the Clearing Corporation, the contribution by the Clearing Member(s), if any, to the Core SGF maintained by the Clearing Corporation, shall be refunded to such clearing member(s).
The Stock Exchange / Clearing Corporation shall make good the shortfall in the Core SGF at any point in time.
The unutilized portion of contribution made by the stock exchange towards the Core SGF, for any segment(s), maintained by the Clearing Corporation, as available with the Clearing Corporation, shall be refunded to the stock exchange, in case the stock exchange decides to close down its business or decides to avail the clearing and settlement services of another Clearing Corporation for that segment(s), subject to it meeting all dues of the clearing corporation.
Clearing corporations and stock exchanges are directed to: take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations; bring the provisions of this circular to the notice of their members and also disseminate the same on their websites; and communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Report.
Source: SecMarx — Investment Policy, Liquid Assets for the purpose of Calculation of Net Worth of a Clearing Corporation and Transfer of Profits. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.