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TMI BlogRisk-based capital and net worth requirements for Clearing Corporations under Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... ory framework pertaining to Market Infrastructure Institutions ("MIIs") viz. Stock Exchanges, Clearing Corporations ("CCP" or "CC") and Depositories. Based on the recommendations made by the Committee, SEBI notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 ("SECC Regulations, 2018"). 2. In order to ensure that the net worth of a CCP adequately captures the risks faced by it, SEBI vide Regulation 14(3) of SECC Regulations, 2018 has adopted a risk-based approach towards computation of capital and net worth requirements for CCPs. The same is reproduced as under : 14(3)(a) Every recognized clearing corporation, on commencement of operations, shall, on an ongoing basis, maintain capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as execution of business strategy, market environment, response(s) to competition or technological progress etc. 3.2.2. A CCP shall identify, monitor, and manage its general business risk and hold sufficient liquid net assets funded by equity to cover potential general business losses so that it can continue operations and services as a going concern. 3.2.3. The capital requirement for business risk shall be subject to a minimum of 25% of annual gross operational expenses. 3.3. For Orderly Wind-down ("C"): 3.3.1. A CCP shall have in place a viable recovery or orderly wind-down plan and hold sufficient liquid net assets funded by equity to implement this plan. 3.3.2. These assets shall be determined by the general business risk pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes, in the form of liquid assets, a net worth of either INR 100 crore or as determined in the manner specified above, whichever is higher. 5. The CCPs shall use the most recent audited information from their annual financial statement for the purposes of calculation of gross operational expenses. 6. The CCPs shall regularly review their net worth requirement and ensure that the net worth does not fall below the prescribed threshold. A certificate to this effect, as signed by the Managing Director of the CCPs, shall be submitted to SEBI within 15 days from the end of every quarter. The first such submission shall be made applicable for the April 2019 - June 2019 quarter. 7. In exceptional cases where the net worth of a CCP falls below th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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