Investment guidelines issued to clearing firms

The market regulator has issued the circular in this regard after taking into consideration the recommendations made by an expert panel on issues pertaining to investment policy of clearing corporation.

To ensure the "highest degree of safety", Sebi on Wednesday asked clearing corporations to invest their money broadly in fixed deposits, government securities and liquid schemes of debt mutual funds.

The market regulator has issued the circular in this regard after taking into consideration the recommendations made by an expert panel on issues pertaining to investment policy of clearing corporation.

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.

While framing the 'investment policy', the clearing corporations will have to consider highest degree of safety and least market risk, Securities and Exchange Board of India (Sebi) said.

The investments need to be broadly in fixed deposits, central government securities and liquid schemes of debt mutual funds.

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

Sebi said that investment in liquid scheme of debt mutual funds will not exceed a limit of 10 per cent of the total investible resources held by the clearing corporation, at any point in time.

In case the clearing corporation has investments in mutual funds beyond the limits, then such excess investments will be liquidated by it within six months. Besides, fresh investments beyond the threshold limit prescribed are not permitted.

The regulator said fixed deposits, central government securities and liquid schemes of debt mutual funds to the extent permissible, cash and bank balance, will be considered as 'Liquid Assets' for the purpose of calculation of net-worth of a clearing corporation.

The regulator said unutilised portion of contribution made by the stock exchange, for any segment, towards the Core Core Settlement Guarantee Fund as available with the clearing corporation will be refunded to the bourse in case it decides to close down its business or decides to avail the clearing and settlement services of another clearing corporation for that segment.