What changed
Previously, transactions between a Primary Member and its own Gilt Account Holder or between two GAHs of the same PM were not allowed on NDS-OM and were not cleared through CCIL. Now, RBI has permitted matching of such trades on both the anonymous Order Matching and RFQ segments of NDS-OM, with mandatory CCIL clearing and settlement. Additionally, bilaterally negotiated trades between these parties can optionally use CCIL settlement.
What it means for you
This change brings previously excluded G-sec transactions into the central clearing framework, reducing counterparty risk for banks and other participants. It also enhances transparency and operational efficiency by allowing these trades to be matched on NDS-OM. Banks acting as Primary Members must ensure compliance with SGL bouncing penalties for any settlement failures.
What you must do
- Update internal systems to enable NDS-OM matching for PM-GAH and inter-GAH trades on both Order Matching and RFQ segments.
- Ensure all such matched trades are routed through CCIL for clearing and settlement.
- Review bilaterally negotiated trades with own GAHs or between GAHs and consider opting for CCIL settlement to reduce risk.
- Reinforce settlement discipline to avoid SGL bouncing penalties as per RBI circular of July 14, 2010.
- Monitor CCIL operational guidelines expected to be issued for detailed procedures.
Who it affects
Primary Members of NDS-OM, Gilt Account Holders, Clearing Corporation of India Limited, All participants in the Government securities market
What types of transactions are now permitted on NDS-OM under this circular?
Transactions between a Primary Member and its own Gilt Account Holder, and between two GAHs of the same PM, are now allowed on both the anonymous Order Matching and RFQ segments of NDS-OM.
Will bilaterally negotiated trades between a PM and its GAH also get CCIL settlement?
Yes, such trades that are bilaterally negotiated and reported to NDS-OM can optionally avail clearing and settlement through CCIL.
What happens if a settlement fails for these transactions?
Any settlement failure will be treated as an instance of 'SGL bouncing' and will attract penalties as per the RBI circular dated July 14, 2010, as amended.