The alliance paves the way for ICEX to outsource clearing and settlement of all trades on it to MCCIL, a SEBI recognised clearing corporation, thus enabling it to focus on its core activities. MCCIL will act as the counterparty for all trades to be executed on ICEX, and guarantee settlement. Accordingly, the associated risks will also be assumed and handled by the MCCIL. So far, clearing & settlement department of ICEX was handing post trade activities.
The tie-up is unique in nature as it’s a deviation from the vertically integrated model typically adopted in Indian exchange traded markets for post trade services. This is also for the first time that a Clearing Corporation in India will be providing services to more than one exchange and for diverse segments –Commodities, Securities and Currencies.
Since, a single clearing corporation is going to provide services for both MSE and ICEX, it opens up many new opportunities for both the exchanges to develop synergies alongside the unified exchange framework that come into effect from October 2018.
Further, the arrangement will be implemented in such a manner that will cause minimal impact to market participants. There could also be common members across the exchanges and these members will be able to use their margins and collaterals in a more meaningful manner. MSE & ICEX members may also consider expanding their trading activity to other segments cleared by MCCIL to make best use of financial resources.
Elaborating about the benefits of the alliance, Sanjit Prasad, MD & CEO, ICEX, said, “With an independent clearing corporation handling the settlement and clearing of trades on ICEX, it will enable us to focus and deploy resources more on product innovation. We are also anticipating many changes in the ecosystem around exchange-traded markets and would like to take a decision on having our own vertically integrated clearing corporation after some time.”
Balu Nair, Managing Director, MCCIL said, “These are interesting times with large-scale regulatory changes in exchange space. Universal exchange norms enable exchanges to explore more asset classes to enhance business. As a Clearing Corporation, our preparedness to clear commodity derivatives in addition to existing asset classes will better equip us to cater to requirements of universal exchanges.”
