Explore infra for trading beyond $-₹ currency pairs: Malhotra to CCIL

RBI's Sanjay Malhotra urges CCIL to broaden forex, derivatives, and tech-driven services to aid rupee internationalisation

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said the Clearing Corporation of India (CCIL) could explore the possibility of putting in place necessary infrastructure to facilitate trading and settlement services for currency pairs beyond the US dollar and rupee (USD-INR), in line with the broader objective of internationalisation of the rupee.

 

CCIL currently facilitates settlement in USD-INR only. 

RBI has been making efforts to internationalise rupee by taking a number of steps including bilateral currency arrangements, rupee trade settlement mechanism, opening of special vostro accounts, etc. 

CCIL provides guaranteed settlement of interbank USD-INR foreign exchange trades via the foreign exchange clearing platform.

Additionally, Malhotra said that as new interest rate derivative products are introduced, CCIL could meet and even anticipate market demand and put in place the necessary infrastructure for the larger suite of products. 

“It would be important for CCIL to continuously explore and enhance its product and service offerings on the Forex Retail and the RBI Retail Direct, ensuring a seamless customer experience and robust system capabilities,” Malhotra said. 

He was speaking at an event organised by CCIL marking its 25-year journey. 

Malhotra highlighted that CCIL clears all government securities and associated repo trades, 99 per cent of the foreign exchange forwards, 88 per cent of all Mumbai Interbank Overnight Rate (MIBOR) based overnight index swaps, 50 per cent of modified Mumbai Interbank Forward Outright Rate (MIFOR) based Overnight Indexed Swaps, and more than 50 per cent the foreign exchange spot market. 

“CCIL will have to continue with the agility and innovation that it has till now demonstrated because with emerging technologies, increasing demands on risk management and cost efficiencies, it will be necessary for them to review and, if required, continuously to optimise and rationalise its risk,” Malhotra said. 

Malhotra further highlighted that many electronic trading platforms are taking a big leap beyond serving just as execution tools to become highly interactive, customer-experience platforms, complete with intelligent virtual assistants, chatbots, and are able to offer increased utility and customisation. And these are developments from which CCIL cannot remain immune from, he cautioned.

“CCIL will need to closely track these developments and take a lead in offering such products and facilities to the domestic markets. In short, CCIL will have to keep pushing ahead to the frontiers of technology, be ahead of others, and provide world-class experience, world-class facilities, world-class risk management, and improve upon the trust which they have already built for themselves,” Malhotra said. 

“We are the only major country, where government securities and repo transactions are traded on an anonymous electronic trading platform with mere real-time dissemination of trade information and are settled efficiently through a central counterparty,” Malhotra said, adding that the trade repository was set up well before the G20 actually recommended reporting of OTC-derivative trades. 

“With the commencement of reporting of cash, commodity, and spot FX traded through CCIL earlier this year, every single trade in RBI-regulated markets, except for some small value Forex trades, is now being reported, adding to transparency of the markets and better visibility of market activities for the regulator,” Malhotra said.