Circular on acceptance of Foreign Sovereign Securities as collateral from Foreign Institutional Investors (FIIs) for Exchange Traded Derivative Transactions

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..... r Clearing House/Corporation 2. All Registered FIIs and Custodians Dear Sirs, Sub.: Circular on acceptance of Foreign Sovereign Securities as collateral from Foreign Institutional Investors (FIIs) for Exchange Traded Derivative Transactions 1. Presently, in Exchange Traded Derivative transactions, FIIs are depositing the collateral with the clearing members, in the form of cash. Under the exis .....

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..... ing members are now permitted to accept foreign sovereign securities with 'AAA' rating, (hereinafter referred to as "sovereign securities") as collateral from FII client with the following necessary safeguards: i. Before accepting sovereign securities as collateral from FII, the clearing member shall enter into a written agreement with the FII and also with the clearing corporation, containing, .....

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..... m the securities are held. iii. The clearing corporation shall also take due care to ensure that sovereign securities tendered as collateral are available for liquidation in the event of insolvency of the clearing member or any intermediary or other person located overseas through whom the securities are held. iv. The clearing corporation shall take adequate care to ensure that the sovereign s .....

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..... argins collected from FIIs. 5. The sovereign securities tendered as collateral shall be treated as part of the cash component of the liquid assets of the clearing member, and shall be subject to the condition that the value of the sovereign securities shall not be more than 10% of the total value of the cash component of the liquid assets of the clearing member. 6. The existing procedure for acc .....

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..... nal Investors (FIIs) for Exchange Traded Derivative Transactions. Annexure I List of Foreign Sovereign Securities, with 'AAA' rating, eligible to be tendered as collateral by Foreign Institutional Investors (FIIs) for Exchange Traded Derivative Transactions To begin with, US Government securities, with 'AAA' rating, are eligible to be tendered as collateral by Foreign Institutional Investors (F .....

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