MSEI clearing corp gets BoE recognition ahead of Brexit

Bank of England (BoE) has granted recognition to the clearing corporation (CC) of Metropolitan Stock Exchange of India (MSEI) for routing trades from the UK to India’s stock exchanges. In preparation for Brexit, UK-based entities have to get trades routed from a CC approved by the BoE for transactions in India. The move is significant as UK-based foreign institutional investors may be able to route their orders through the MSEI CC for trading in Indian markets once interoperability between CCs kicks in from June 1. Clearing corporations of both the BSE and the NSE are yet to receive such approval from the BoE.

A source close to the exchanges said both of them had applied and expect recognition in a couple of weeks. Interoperability refers to allowing trade settlement on any exchange from a CC, which was earlier restricted. Trade could be routed to an exchange earlier only through a CC owned by it.

In July 2017, SEBI signed an MoU with the European Securities and Market Authority (ESMA) under European Markets Infrastructure Regulation (EMIR) for exchange of information regarding CCs. In view of Brexit arrangements, BoE issued regulations to recognise non-UK CCs to provide services in the UK following the UK’s withdrawal from the EU. Those not recognised by the BoE cannot serve UK clients.

With interoperability among CCs to be operationalised by June 1, MSEI CC applied with the BoE for recognition. Besides MSEI CC, the BoE list also names the Clearing Corporation of India, which is recognised by the RBI. The recognition, valid for three years, will allow MCCIL (Metropolitan Clearing Corporation of India) to clear trades for UK-based entities trading in India, once Brexit happens.

Balu Nair, MD, MSEI CC, said, “The approval holds significance with interoperability of clearing corporations kicking in from June 1, this year. Currently, we clear and settle trades for MSE and ICEX which do not have significant FPI participation, except in currency derivatives. Most FPI trades are witnessed on the NSE and the BSE. This recognition and interoperability will help boost our business and attract new institutions, especially those constituted in the UK.”