Sebi allows clearing firms to invest in overnight funds; sets limit at 10%

Markets regulator Sebi on Thursday allowed clearing corporations to make investments in overnight funds.

Overnight funds are open-ended debt mutual fund schemes that invest in securities with a maturity of one day.

However, the combined investments made by clearing corporations in liquid funds and overnight funds should not exceed a limit of 10 per cent of the total investible resources held by them, the Securities and Exchange Board of India (Sebi) said in a circular.

Further, the investments in overnight funds shall also be considered as liquid assets for the purpose of calculation of net worth of a clearing corporation.

The move comes following a review of investment avenues available for clearing corporations and based on the feedback received from various stakeholders.

Earlier in 2016, the regulator had asked clearing corporations to invest their money broadly in fixed deposits, government securities and liquid schemes of debt mutual funds in order to ensure the highest degree of safety.

The fixed deposits should be made with banks having a net worth of more than Rs 500 crore.

Clearing houses are associated with an exchange to handle the confirmation, settlement and delivery of transactions, fulfilling the main obligation of ensuring transactions in a prompt and efficient manner.