Calcutta Stock Exchange to ink deal with clearing corporation

The Calcutta Stock Exchange (CSE) is expecting to sign an agreement with a clearing corporation to ensure the exchange's continuity, as it is awaiting the report from a Japan-based financial holding company to rope in new investors.

"We are expecting the report from Nomura Holdings to come shortly and are in talks with a clearing corporation which is expected to take a call on the proposal," managing director and CEO of CSE B. Madhav Reddy said here on Saturday on the sidelines of an event organised by the Indian Chamber of Commerce.

Reddy said once the clearing agreement is signed it will go to capital market regulator SEBI for its consideration and approval.

South Asia's oldest stock exchange, the CSE is facing a critical scenario of not being able to transfer clearing and settlement functions to a clearing corporation in the absence of clarity on risk measurement issues.

However, a recent clarification from SEBI has addressed this concern.

"There was a problem on the waterfall. Earlier, the default waterfall was not defined; now it has been defined after 2014 and it has come under core SGF which is very minimal at a volume of Rs.50 crore, which we used to have on a daily basis," he said.

Waterfall refers to a contractual loan repayment plan from a debtor prioritising the payments to several creditors based on the size of the loan while core SGF (settlement guarantee fund) refers to risk management system as decided by SEBI.

The present core SGF of CSE is Rs.38 crore.

In June last year, the Kolkata-based bourse tried to enter into an agreement with Indian Clearing Corporation Limited, the clearing corporation of the Bombay Stock Exchange but the talks failed.

In April 2013, the CSE suspended trading following its failure to comply with the Stock Exchanges and Clearing Corporations) Regulations, 2012.