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SEBI being an autonomous body by the government of India has given statutory powers to approve by-laws of a securities exchange. SEBI committee review’s the structure of market infrastructure institutions. The body has enjoyed success as a regulatory by pushing the best reforms successively. In this article, we will discuss SEBI Reduces Minimum Net Worth Requirements for Clearing Corp in IFSC.
An Institution formed to facilitate the clearance of payments, securities, and acts as a third-party agency between the two parties i.e. buyers and sellers engaged in the financial transactions.
Net worth reflects the financial strength of the companies/corporation. It provides a layout of the entity’s present financial position.Net worth can be calculated by deducting assets minus liabilities.
To establish a peer-to-peer link for ensuring interoperability. SEBI and Clearing corporations entered into an agreement to manage the risk management framework, system capability and to monitor the client margin. To establish participant link for inter-operability, SEBI requires clearing corporation participation. It also includes-
SEBI has cut the net worth of all clearing corporations in the international financial services Centre. SEBI prescribes the net worth requirement of all clearing corporations in the international financial services Centre in clause 5 of SEBI (IFSC) GUIDELINES, 2015.
The circular states that every recognized clearing corporation shall maintain-WHICHEVER IS HIGHER
A minimum net worth of 100 crore rupees
As captial determined under regulation 14(3)(a)&14(3)(b) by the SEBI.
Earlier the net worth requirement in the form of liquid assets was Rs300 crore which has been brought down to Rs 100 crore whereas the minimum net worth of clearing corporation at the time of commencement of operations will remain the same as Rs 50 crore.
SEBI has provided a blueprint to determine the minimum net worth requirement that includes capital requirements based on credit and business risk (legal and operational) and recovery of operations.
In case of Clearing Corporation in the international financial service Centre falls below the prescribed limit to be maintained at all times, it should inform the regulatory, the reason behind not maintaining the threshold limit for the stipulated time and the measures to re-attain the prescribed limit.
The clearing corporation dealing in international financial Centres has to review regularly their net worth requirement by ensuring that it will not fall below the threshold limit.
SEBI has reduced the minimum net worth requirement in the form of a liquid asset from rupees 300 crores to 100 crores. The clearing corporation on the commencement of the operation shall maintain the liquid assets( minimum net worth) same as Rs 50 crore or the capital determined by the SEBI from time to time and will enhance the net worth to Rs 100 Crore over a period of 3 years from the date of commencement of operations.