Acceptance of Bank Guarantees by Clearing Corporations in International Financial Services Centre (IFSC)
Summary
SEBI amends paragraph 2.6.3 of its November 2016 circular to permit Clearing Corporations in IFSC to accept bank guarantees issued by local branches as eligible collateral. The amendment mandates that cash and cash equivalents must constitute at least 50% of total liquid assets at all times. Clearing Corporations are directed to implement necessary system changes, notify members, and report implementation status to SEBI.
Text
Based on the feedback received from the clearing corporations, it has been decided to amend para 2.6.3 of the abovementioned SEBI circular dated November 28, 2016, to read as under -
Clearing corporations in IFSC shall be permitted to accept cash and cash equivalents (which shall include major foreign currencies as may be decided by the clearing corporation from time to time, term deposit receipts and bank guarantees issued by bank branches located in IFSC), 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 are directed to: a) take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations; b) bring the provisions of this circular to the notice of their members and also disseminate the same on its website; and c) communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Report.
This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market.
Source: SecMarx — Acceptance of Bank Guarantees by Clearing Corporations in International Financial Services Centre (IFSC). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.