ESMA recognises NSE and BSE's clearing arms as qualified CCP

European Securities & Markets Authority (ESMA) has certified the clearing arms of stock exchange NSE and BSE as qualified central counterparty (CCP), a move which will lower the capital requirements for European participants in the domestic markets.
A qualified CCP member is subjected to lower capital requirements/charges under the Basel III framework introduced by the Basel Committee on Banking Supervision.
ESMA has granted recognitions to NSE's arm The National Securities Clearing Corporation Ltd (NSCCL) and BSE's subsidiary Indian Clearing Corporation Limited (ICCL).
In separate statements today, both NSE and BSE said that their respective clearing arms have been "granted recognition by European Securities & Markets Authority as a 'third-country CCP' under Chapter 4 of the title III of the European Market Infrastructure Regulation (EMIR)".

"The recognition to NSCCL as a 'third-country CCP' is with effect from September 27, 2017," they added.
According to NSE, European participants shall be able to apply a significantly lower risk weighting from present 2 per cent towards their trade exposures to the domestic markets.

Similarly BSE said that a European clearing member registered with a qualified CCP will be a beneficiary of the enhanced risk management framework of ICCL and would also benefit from application of concessional risk weightings to their group's novated exposures to the clearing corporations.
"This recognition of NSCCL would enable European based banks to continue to participate in the Indian Capital markets and is a step in reinforcing that the legal and supervisory arrangements in India under regulator Sebi provide for an effective equivalent system for recognition of third country CCPs under EMIR," NSE said.

"This development should give increased confidence in the Indian capital markets and encourage increased participation from European based market intermediaries and asset managers," it added.
ICCL managing director and CEO K Kumar said that "ICCL's robust risk management framework enables members to manage their counterparty risk efficiently, with lower capital requirements arising out of ICCLs status as QCCP granted by Sebi and ESMA".
The clearing corporations carry out the functions of clearing, settlement, collateral management and risk management for various segments of their respective bourses.