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                                                                                      OTC EXCHANGE OF INDIA

CIRCULAR

 

Ref. No.: 0106/OTCEI/C&S/2003/006

 13th January, 2003 

Dear Member/ Dealers / Custodians,

 Sub:  Clearing and Settlement in Retail Debt Market (Government Securities)

The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) has allowed trading in government securities through a nation wide, anonymous, screen based, order driven trading system of the stock exchanges, in the same manner in which trading takes place in equities, with a view to allow all classes of investors to participate in this market. Accordingly, OTCEI proposes to commence retail trading in Government securities. With this purpose, OTCEI has devised a scheme in order to clear and settle the trades done in these securities:

 The salient features of the said scheme are outlined below 

  1. Clearing and settlement of all trades in this market shall be subject to the Bye Laws, Rules and Regulations of the Exchange and such regulations, circulars and requirements etc. as may be brought into force from time to time in respect of clearing and settlement of trading in Retail Debt Market (Government securities). 
  1. Clearing members of Capital Market of the Exchange will be allowed to participate in clearing and settlement of trades done in Government securities, subject to a minimum net worth of Rs.1 crore.

 The minimum initial contribution to the Settlement Guarantee Fund (SGF) of this market by way of additional base deposit (ABD) of Rs.50,000/- is required to be kept with the Exchange which will be reviewed at a later date. 

  1. The gross exposure in respect of these securities shall not exceed 20 times of the ABD. Any member desirous of a higher exposure will be required to bring in additional base capital as in Capital Market segment.
  1. Clearing and settlement would be based on multilateral netting of the trades in a day.  Funds and securities shall be settled through the clearing banks and depositories of OTCEI in a manner similar to equities.

The settlement schedule for the Retail Debt Market (Government Securities) Deals is given below.

S. No.

Day

Description

1

T

Trade date

2

T+1   03.30 p.m.

Custodial confirmation

3

T+3   11.00 a.m.

Securities and Funds pay-in

4

T+3

Securities and Funds pay-out

 

  1. OTCEI shall compute member obligations and make available reports/data by T+1. The obligations shall be computed separately for this market from the obligations of the equity market.
  1. The existing CM pool account with the depositories that is currently operated for the CM segment, will be utilized for the purpose of settlements of securities.
  1. Settlement of funds will be carried out through the clearing banks. The existing clearing bank accounts shall be used for the same.
  1. In case of short deliveries, unsettled positions shall be closed out. The close out would be done at Zero Coupon Yield Curve (ZCYC) valuation for prices plus a 5% penalty factor. The buyer shall be eligible for the highest traded price from the trade date to the date of close out or closing price of the security on the close out date, plus interest calculated at the rate of overnight FIMMDA-NSE MIBOR for the close out date, whichever is higher, and the balance shall be credited to the Investor Protection Fund.

      9.      Mark to market margins will be applicable on all-open positions in government securities and shall be calculated on the basis of ZCYC prices. This margin shall be payable on T + 1 day.

 10.  Members may please note that the penal actions such as disablements etc. and penalty points shall be similar to those in equities.

 11.   The trading in the Retail Debt Market shall be open from 9.55 a.m. to 3.30 pm.

Institutions that are permitted under the relevant regulations to transact only on the basis of giving and taking delivery will operate through the custodial mechanism and shall be exempt from margin as in the case of the equities. Custodial trades on behalf of Provident Funds transacting through SGL – II accounts shall also be eligible for margin exemption.

Any clarifications may be addressed to the following persons on Tel. No. 26598388.

1.      Sanjay Patil

2.      Ashish Bansal 

 This shall be applicable w.e.f trade date January, 16, 2003.

 Thanking you,

 Yours faithfully,

For OTC Exchange of India

 R.Anand

Asst. Vice President

 

 

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