The National Commodity and Derivatives Exchange of India (Ncdex) has received in-principle approval from commodity market regulator SEBI to set up a standalone clearing corporation, to be called National Commodity Clearing Ltd (NCCL).
The exchange plans to invest ₹100 crore in the clearing corporation, which is being set up in line with a SEBI directive to de-mutualise commodity exchange operations and promote transparency.
The exchange will transfer all its existing technology for clearing trades to the newly formed wholly-owned clearing corporation.
“The work on constituting board members and other required infrastructure is currently under process,” Vijay Kumar, Managing Director, NCDEX, told
The exchange will use internal accruals to fund the clearing corporation, he said. NCDEX has to increase the net worth of the clearing corporation to ₹300 crore by September 2019, per SEBI guidelines.
Other exchanges on radar
NCCL will begin by offering its services to NCDEX and explore opportunities to extend the services to other interested exchanges, said Kumar.
The combination of NCDEX’s trading platform, repository services of National E-Repository Ltd and clearing and settlement facilities of NCCL will ensure depth in commodity futures trading, he added.
The clearing and settlement covers products spanning agricultural commodities, precious metals and other non-agricultural commodities.
Strong agri ecosystem
By establishing NCCL, the exchange is attempting to leverage its clearing and settlement expertise in the agri-commodity domain, Kumar said. It is also aiming to plug gaps with a robust and stringent risk management and settlement platform for the collective benefit of the agri ecosystem, he added.
NCDEX will transfer clearing and settlement, deposit and risk management functions to the new entity soon.
The clearing corporation will derisk the functioning of commodity exchanges particularly when the market regulator Sebi is planning to open up the market for a new set of participants including mutual funds, institutional investors and banks.
Last August, MCX, the other commodity exchange, received Sebi approval for a proposal to set up a clearing corporation.
MCX Clearing Corporation is in the process of appointing new Managing Director and CEO to spearhead the venture.