The Clearing Corporation of India (CCIL) launched its trade repository service for over-the-counter (OTC) foreign exchange derivatives on Monday.
Dr Subir Gokarn, Deputy Governor, RBI, who presided, said India was among the first countries to have this capability. He said that the G-20 countries had committed to report all OTC derivative contracts to trade repositories by December 2012 to ensure that national regulators have access to all relevant information.
OTC derivatives are contracts traded directly between two parties without going through an exchange. These are leveraged complex structures and often contribute to systemic risk. Dr Gokarn said that the expert observers had felt the lack of transparency in this market segment had contributed to the precipitation of the financial crisis four years ago.
A trade repository is an entity that maintains a centralised electronic database of transaction data. This will provide a clear picture of the positions and exposures, product-wise, counterparty-wise, and a view of market concentration — all of which will help reduce risk, improve operational efficiency and save costs for the market. Regulators will be able to have better market surveillance.
The repository will capture transaction details of all forex derivatives traded in the market on a near real-time basis. In the initial stages, the transactions will be reported with a lag of an hour, Ms Indrani Rao, Chief Forex Officer, CCIL, said.
In the first phase, the repository service will capture all inter-bank forex forwards and swaps in the USD-INR currency pair and currency options in the FCY-INR. The later phases would capture transactions in other currency pairs, currency swaps and interest rate swaps and options denominated in foreign currency.