Clearing corporation ownership shift remains shrouded with uncertainty

Sources say diversified shareholding may create challenges in fundraising, will add complexities

The Securities and Exchange Board of India’s (Sebi’s) plan to hive off clearing corporations (CCs) from stock exchanges remains clouded. This comes as uncertainties remain related to profitability, working capital requirements, and contributions to the Settlement Guarantee Fund (SGF), industry sources said.

 

Unless these areas are addressed, it will be challenging to transfer ownership of CCs away from stock exchanges, they added.

 

Last week, Sebi chairperson Tuhin Kanta Pandey flagged ownership of CCs as a key issue — alongside governance, technology, and legal concerns. These need to be resolved before approving the National Stock Exchange’s (NSE’s) initial public offering (IPO).  

 

In November 2024, Sebi proposed diversifying CC ownership, which is currently restricted to stock exchanges.

 

While the regulator argued that CCs could independently fund technology upgrades, operations, and SGF contributions, experts warn that fragmented ownership could complicate these efforts.  

 

“CCs are not-for-profit entities. Sebi will need extensive stakeholder consultations before finalising the proposal. Costs, expenses, and capital requirements must be reassessed,” said an industry insider.

 

He added, “The regulator must also evaluate whether autonomy truly reduces concentration risk — one of the key reasons for seeking independence.”

 

Sebi may also examine potential conflicts of interest between exchanges and CCs. Though the proposal was not discussed in the recent board meeting, sources say consultations are pending.

 

Under the proposal, the existing shareholders of the parent exchange would be given 49 per cent ownership in the CC on a pro-rata basis, while exchanges would retain 51 per cent stake. The exchanges will then be given a window of five years to reduce their stake to 15 per cent by selling shares to other entities. 

 

“Potential investors may hesitate, as CCs prioritise public utility over profits. Raising capital for the SGF could be difficult if there’s no clear financial upside,” said another source.  

 

Fundraising may also be challenging if entire ownership is diluted among existing shareholders of exchanges — many of whom are retail investors.  

 

Globally, most CCs — such as CME Clearing, ICE Clear Credit, and Eurex Clearing — are owned by single exchanges. Exceptions include Euroclear (multi-shareholder) and China’s CSDC (two exchange-owned). India does not permit the DTCC model (member-owned) to avoid conflicts between CCs and clearing members.  

 

In India, the Clearing Corporation of India (CCIL) stake is held by banks, primary dealers, and financial institutions. 

 

CCs play a critical role in trade confirmation, settlement, and interoperability across exchanges.  

 

In FY24, NSE Clearing contributed ₹1,103 crore to the core SGF, while Indian Clearing Corporation (ICCL) added ₹92 crore. Sebi did not respond to queries till the time of going to press.

Road to autonomy

 

*  Costs, expenses, and capital requirements could be key issues, say sources

 

*  Potential investors may hesitate with limited financial upside for them

 

*  Discussions pending on whether independence will help reduce concentration risk

 

*  Sources say Sebi may analyse if there have been any instances of conflict of interest