Recognition of credit ratings given by reputed foreign credit rating agencies - SEBI - SEBI/DNPD/DC/Cir- 19/2004/02/06

CHIEF GENERAL MANAGER DERIVATIVE AND NEW PRODUCTS DEPARTMENT SEBI/DNPD/DC/Cir- 19/2004/02/06 February 6, 2004 To, The Managing Director / Executive Director of Derivative Segment of NSE BSE and their Clearing House / Corporation. Dear Sir, Sub: Recognition of credit ratings given by reputed foreign credit rating agencies This circular is being issued in exercise of powers conferred by section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with section 10 of the Securities Contracts(regulation) Act 1956, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. Clause 4(V)(A)(b) of SEBI Circular No. IES/DC/CIR-4/99 dated July 28, 1999, stipulates that: Not more than 5% of the trade guarantee fund or 1% of the total liquid assets deposited with the clearing house whichever is lower shall be exposed to any single bank which is not rated P1 (or P1+) or equivalent by a RBI recognised credit rating agency and not more than 50% of the trade guarantee fund or 10% of the total liquid assets deposited with the clearing house whichever is lower shall be exposed to all such banks put together. It has now been decided to accept bank guarantees of banks having credit rating from reputed foreign credit rating agencies also, towards the liquid assets of a member. Hence, Clause 4(V)(A)(b) of the said circular is being modified to read as follows: Not more than 5% of the trade guarantee fund or 1% of the total liquid assets deposited with the clearing house, whichever is lower, shall be exposed to any single bank which is not rated P1 (or P1+) or equivalent, by a RBI recognised credit rating agency or by a reputed foreign credit rating agency, and not more than 50% of the trade guarantee fund or 10% of the total liquid assets deposited with the clearing house, whichever is lower, shall be exposed to all such banks put together. Yours sincerely, N.PARAKH