Change in functions of commexes' clearing corporations

They will not give financial counter-party guarantees for physical deliveries

Clearing corporations, being set up by the leading commodity exchanges Multi Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX), are readying plans to go live in April.

An important change in clearing corporations will be that they will give only financial counter-party guarantees for clearing and settlement. There will be no guarantees for physical deliveries.

The Securities and Exchange Board of India (Sebi) is understood to have given in-principle approval to by-laws prepared by these clearing corporations.
 

The MCX’s clearing corporation has invited applications for managing director (MD) and chief executive officer (CEO) and expects the MD to be in place by March.

Sebi has said that“the commodity clearing corporations will guarantee pay-out till marking of delivery and in case of default in delivery they have to give financial guarantee.”

The regulator is understood to have accepted the change because deliveries in commodities, especially in agri commodities, are complex businesses because there is no physical delivery-based settlement in derivatives.

No segregation has been made regarding deliveries in the agri and non-agri segments.

The NCDEX is finalising plans to resume a full-fledged clearing corporation that will be a different entity in line with clearing corporations of equity exchanges. Sources said that both the NCDEX and MCX were expected to go live with their respective clearing corporations in April when they transfer their settlement guarantee funds to the corporation.

Clearing corporations require Rs 10 million as capital and by-laws of both clearing corporations are ready, according to sources.
 

Sources said, “The NCDEX has already received our board approval to set up clearing corporation of our own and we are targeting to live with our clearing corporation by April 1. It already has a company NCCL that provides outsourced clearing services to NCDEX and the bourse will be turning the same company to become a full-fledged clearing corporation by 1st April.”

The full-fledged clearing corporation will be a big preparatory step for this exchanges to be able to compete with the NSE and BSE on a level playing field.

Sebi nod to change

— MCX and NCDEX planning to go live with their clearing corporations in April

— Sebi has given in-principle approval to by-laws 

— The regulator is understood to have accepted the change because deliveries in commodities are complex businesses 

— Clearing corporations require Rs 10 mn as capital