The Reserve Bank of India on Monday revised its June 2019 criteria for Central Counterparties.
A Central Counterparty (CCP) is a system provider that uses novation to act as an intermediary between participants in transactions accepted for settlement. It acts as the buyer to every seller and the seller to every buyer, facilitating the settlement of their transactions.
The Central bank introduced many updated directives for the CCPs:
Minimum net worth : Any entity looking for recognition or authorisation as a CCP should have a minimum net worth of at least Rs 300 crore at the time of application.
- Mandatory submission of
audited net worth : Every authorized Central Counterparty (CCP) would be required to provide a certificate from an official auditor showing its net worth at the end of the financial year, which must be submitted within six months after the financial year ends.
- Public company limited by shares: The
RBI stated that the shares of an authorized Central Counterparty (CCP) must be owned by those who use its services. Furthermore, the CCP must make sure that anyone who is no longer a user, should sell their shares.
- Approval process for
foreign CCP in India: Foreign Central Counterparties (CCPs) should seek approval from the apex bank to operate as recognized CCPs in order to clear and settle transactions in India.
- Formation of compliance committee: Every authorized CCP should establish a regulatory compliance committee chaired by an independent director.
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