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Economics

Six Indian clearing corporations have been de-recognized by Europe

  • With effect from April 30, the European Securities and Markets Authority (ESMA) has de-recognized six Indian clearing organisations as Third Country Central Counterparty (TC-CCP).
  • However, it allowed European banks to continue doing business with them until April 2023 without penalty.

What exactly are Clearing Corporations?

  • Clearing corporations, commonly known as central counterparties (CCPs), are financial firms that function as mediators in financial markets between buyers and sellers.
  • They aid in the risk management of default by ensuring that each party participating in a deal has the sufficient funds or securities to meet their obligations.
  • Clearing houses also make certain that trades are settled in a timely and effective manner.
  • Clearing corporations are those that are involved in the clearing and settlement of trades in India’s cash and derivatives markets.

ESMA Decisions

  • CCIL, Indian Clearing Corporation Ltd, NSE Clearing Ltd, Multi Commodity Exchange Clearing, India International Clearing Corporation, and NSE IFSC Clearing Corporation have all lost their recognition from ESMA.
  • ESMA requested that Indian authorities sign an agreement granting it the authority to oversee and supervise clearing businesses.
  • Indian regulators rejected to allow foreign businesses in Indian clearing corporations supervisory power.
  • In the EU region, ESMA designated these clearing organisations as Third Country Central Counterparties (TC-CCPs).

In response to India’s argument

  • ESMA requested that the RBI and the Securities and Exchange Board of India (SEBI) sign an agreement granting it the authority to oversee and supervise clearing businesses.
  • Indian regulators refused to provide a foreign body supervisory authority over Indian clearing businesses.
Source: https://economictimes.indiatimes.com/markets/stocks/news/eu-market-regulator-withdraws-recognition-of-6-indian-clearing-corporations/articleshow/99936279.cms#:~:text=The%20Clearing%20Corporation%20of%20India,clearing%20corporations%20facing%20the%20axe.
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