Ministry seeks public views on common clearing corporation

The finance ministry has sought public comments on a proposal to set up a common Clearing Corporation (CC) for national commodity bourses, in order to reduce transaction costs for market participants, as well as to strengthen risk management systems.

At present, national commodity exchanges have integrated online facilities for trading, clearing and settlement of futures contracts. Only one exchange, the National Commodity and Derivatives Exchange, has set up a CC which is a 100 per cent subsidiary of the exchange, for clearing and settlement of trades executed on the exchange. All other national bourses have clearing and settlement functions as a division of the exchanges. The contracts are cash-settled or settled by physical delivery at expiration.

In a report to the finance ministry, a working group recommended an independent common CC for the national commodity exchanges, after studying various vertically integrated models of trading, clearing and settlement.

Public views on the report are sought by next month.

The group has suggested of an independent CC with a minimum net worth of Rs 100 crore to begin with, to be reassessed after a year.