OTC EXCHANGE OF INDIA
Ref. No.: 0106/OTCEI/C&S/2003/006
Member/ Dealers /
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
The salient features of the said scheme are outlined below
- 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
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
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.
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.
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.
T+1 03.30 p.m.
T+3 11.00 a.m.
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.
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.
of funds will be carried out through the clearing banks. The
existing clearing bank accounts shall be used for the same.
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
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.
Members may please note that the penal actions such as
disablements etc. and penalty points shall be similar to those in
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.
This shall be applicable w.e.f trade date January, 16,
For OTC Exchange of
Asst. Vice President