The European Securities and Markets Authority (ESMA) has de-recognised six Indian clearing houses due to non-compliance with European Market Infrastructure Regulation norms.
Key points
- The six clearing corporations are: The Clearing Corporation of India (CCIL), Indian Clearing Corporation, NSE Clearing, Multi Commodity Exchange Clearing, India International Clearing Corporation, and NSE IFSC Clearing Corporation.
- CCIL is supervised by the RBI, NSE IFSC Clearing Corporation under the GIFT City regulator International Financial Services Centres Authority; and the rest are regulated by the SEBI.
- ESMA had asked Indian regulators — the Reserve Bank of India, the Securities and Exchange Board of India and the International Financial Services Centres Authority — to sign an agreement giving it supervisory powers over Indian clearing corporations servicing European banks.
- These clearing corporations were recognised as Third Country Central Counterparty (TC-CCP) in European Union.
- Indian regulators are against giving such powers to a foreign entity since these corporations settle the country’s entire cash and derivatives market in equities, bonds, and forex markets.
- European banks such as Deutsche Bank, BNP Paribas, Credit Suisse, and Societe Generale, which are governed by ESMA’s norms, run custodian businesses in India for clearing foreign portfolio investments.
- ESMA’s norms mandate an exchange of information between the European market regulator and competent authorities of third countries, including access to all information requested with regard to clearing houses.
