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Media Release

Media Release

ICCL Renews Counterparty Default Insurance for USD 60 million

 

Mumbai, March 22, 2017: The Indian Clearing Corporation (“ICCL”) has  renewed  its Counterparty  Default  Insurance  cover  for USD 60 million amounting to  INR  4.02  billion.  Now  in  its  fourth  year,  the objective of the Policy is to protect ICCL against counterparty defaults, and add a further capital  cushion  to  the  ICCL  networth  making  the  resources  of  the  non-defaulting members even safer.

ICCL  seeks  to  maintain  sufficient  financial  resources  to  finance  growth  and  ensure financial flexibility while maintaining its creditworthiness and liquidity. ICCL is the only clearing corporation in the World with such a Default Insurance, which comes above the Default Fund of the clearing corporation in the Default Waterfall. The policy further boosts  the  ability  of  ICCL  to  absorb  losses  before  any  resources  of  the  non-defaulting members  are  put  at  risk.

The  magnitude  of  potential  loss  due  to  default  a  clearing corporation  can  undertake  without  affecting  the  capital  of  non-defaulting  members  is contingent   upon   the   networth   of   the   Clearing   Corporation   and   additional   capital cushions,  which  insulates  the  non-defaulting members’ resources  from the default loss.

The additional capital cushion, provided by the Insurance cover, along with ICCL’s Core SGF and other resources   in   the   Default   Waterfall,   covers   nearly   4   times   the   default   fund requirement  of  ICCL  and  further  increases  the  safety for  domestic  and  international participants alike. This Default Insurance cover has been one of the enablers for ICCL to limit the liability of additional contributions by non -defaulting members to INR 1 million.

 

About ICCL:

ICCL was incorporated in 2007 as a wholly owned subsidiary of BSE. BSE is Asia’s oldest stock   exchange   with   more   than   5300   listed   companies.   ICCL,   a   Qualified   Central Counterparty (“QCCP”), carries out the functions of clearing, settlement, collateral management and risk management for various segments of BSE. ICCL is the only clearing

corporation  in  India  to  have  been  granted  "AAA"  rating  by  two  rating  agencies,  India Ratings  Ltd.  (Indian arm of Fitch Ratings) and Care Ratings Ltd.  ICCL is primarily regulated by the Indian Capital Market Regulator, SEBI and also the Central Bank, RBI, for select products.

ICCL  provides  full  novation  and  has  the  responsibility  of  guaranteeing  contractual performance by playing the role of a central counterparty for trades executed on BSE and guaranteed by ICCL, thereby eliminating counterparty risk for the members. In essence,

it  splits  the   original  contract   between  the  initiating  counterparties  into  two  new

contracts;  one  each  between  ICCL  and  the  initiating  counterparties.

Novation  enables ICCL  to  be  the  universal  counterparty  to  all  contracts  and  allows  greater  flexibility  and discretion   in   its   clearing   and   settlement   practices. ICCL   has   put   in   place   a   risk management  framework  to  mitigate  the  risk  it  undertakes  in  its  capacity  as  a  Clearing Corporation.

Media Contact

Yatin Padia

022 22728516

Yatin.padia@bseindia.com