The Clearing Corporation:

• Acts as a clearinghouse, providing clearing and settlement services.

• Determines the funds and securities obligations of trading members.

• Ensures trading members meet their obligations.

• Oversees post-trade activities, including clearing and settlement of trades.

• Provides central counterparty clearing, guaranteeing settlement of trades.

By assuming the counterparty risk, the Clearing Corporation ensures that trades are settled efficiently and reduces the risk of default, providing a safe and efficient post-trade processing environment for the exchange.

Clearing Corporation: The Middleman Ensuring Smooth Transactions

Clearing corporations play a crucial role in facilitating seamless transactions by acting as:

• A buyer to every seller

• A seller to every buyer

They intermediate transactions, ensuring:

• Purchase and sale are facilitated simultaneously

• Funds and securities are transferred on the settlement date

The settlement process involves:

• Determining obligations of members (delivery and receipt)

• Discharging obligations through settlement

Clearing corporations are subject to regulations based on IOSCO's Principles for Financial Market Infrastructures (PFMIs), ensuring:

• Stability and efficiency in the financial market

• Reduced risk of default and systemic risk

• Protection of investors and maintaining market integrity

By acting as a central counterparty, clearing corporations provide a safe and efficient way to settle transactions, minimizing the risk of default and ensuring a smooth settlement process.

Clearing Members (CMs) are authorized entities that:

• Conduct trades on behalf of themselves or their clients

• Settle trades with the Clearing Corporation (CC) or Clearing House

• Make pay-in and receive pay-out transactions through their accounts

There are two types of Clearing Members:

1. Exchange Members: All members of the stock exchange are considered Clearing Members.

2. Custodian Clearing Members: Custodians permitted by the stock exchange to act as Clearing Members, providing clearing and settlement services to their clients.

Clearing Members play a crucial role in the clearing process, ensuring that trades are settled efficiently and securely.

Here is a list of clearinghouses in India ¹ ²:

• National Securities Clearing Corporation Limited (NSCCL): acts as a counterparty between the buyer and the seller in the settlement process.

• Indian Clearing Corporation (ICCL): regulated by the SEBI Act and the Securities Contract (Regulation) Act.

• MCX-SX Clearing Corporation (MCX-SXCCL): also regulated by the SEBI Act and the Securities Contract (Regulation) Act.

• Indian International Clearing Corporation (IFSC) Limited: provides clearing and settlement for transactions in foreign exchange.

• Metropolitan Clearing Corporation of India Limited: no additional information available.

• Multi Commodity Exchange Clearing Corporation Limited: no additional information available.

• National Commodity Clearing Corporation Limited: no additional information available.

• NSE IFSC Clearing Corporation Limited: no additional information available.