What changed
Previously, all legs of WI transactions had to be executed on the NDS-OM platform. Now, the cover leg can be done off-platform, such as through telephone market, while the originating sale or purchase must remain on NDS-OM. This follows the Mid-Term Review of the Annual Policy Statement 2007-08.
What it means for you
Banks and other NDS-OM members gain more flexibility in managing WI positions by hedging or covering trades via telephone, potentially reducing costs and improving execution speed. However, they must ensure robust internal controls to monitor WI limits across both on- and off-platform trades. The change becomes effective after necessary NDS software modifications are completed.
What you must do
- Review and update internal controls to monitor WI limits considering cover trades done both on and outside NDS-OM.
- Ensure that all originating WI trades (sale or purchase) continue to be executed only on the NDS-OM platform.
- Prepare for operational readiness once RBI communicates the software modifications enabling reporting of off-platform WI trades on NDS.
- Train trading and risk management teams on the new flexibility and compliance requirements.
Who it affects
All NDS-OM members, Banks and primary dealers trading in central government securities, Treasury and risk management teams handling WI transactions
What is a 'cover leg' in WI transactions?
The cover leg refers to the offsetting trade that closes out or hedges the original WI position. This circular allows that leg to be done outside NDS-OM, e.g., via telephone.
When will this change become effective?
It becomes operational after RBI completes necessary software modifications for reporting off-platform WI trades on NDS. RBI will communicate the effective date separately.
Does this change affect the original WI trading guidelines?
No. All other terms and conditions from earlier circulars remain unchanged. Only the cover leg execution venue is expanded.