What is the proposed system of settlement that CCIL will follow? :
CCIL will run a multilateral netting system for Interbank forex transactions that will net the members payments and receipts in a currency, even if they are due to or from different counter-parties, and settle the net position in both legs of the transactions.

Who can be a Member of CCIL - Forex Segment? :
All the Authorised dealers in Foreign Exchange who have a Current Account with Reserve Bank of India are eligible to become a member of CCIL (Forex Segment). CCIL would use INFINET, a closed user group network as communication backbone. Hence, it is necessary for Members to have an INFINET connection for transmission of data to CCIL via INFINET.

What are the types of trades that will be settled through CCIL? :
Initially, CCIL would take up Spot and Forward Interbank trades in USD/INR for clearing and settlement. In phase II, it is proposed to include Cash and Tom deals in USD/INR for settlement.

How will the connectivity between CCIL and the members be established? :
The Members would need to be an Infinet member (Reserve Bank of India). The Structured Financial Messaging Systems (SFMS), once rendered operational by the Reserve Bank of India, will drive the exchange of financial messages between banks. Until SFMS becomes operational, financial messages between members and CCIL can be done using an Forex Deal Reporting (FDR) Utility. This FDR utility software has been developed at CCIL to link the Members designated back office system with CCIL System and is available for download on the Web browser

How will CCIL receive Trades/Deals from the Member Banks? :
Trades/Deals would be received by CCIL from the Member Banks back office through Forex Deal Reporting Utility (FDR) in the form of IFN 300 . The connectivity between the Member banks back office and CCIL would be via the Infinet which is the domestic payments system network and each bank will be connected to it via a Gateway Server. IFN 300

What are the basic validations CCIL will perform for the data received? :
CCIL's system would check for the validity of the file format and run the business validations for each deal. Deals passing through the validations would be taken up for further processing.

What is the Cut-off time for reporting of trades /deals to

CCIL for Settlement through CCIL? :
The cut-off time for reporting the forex deal is 12 noon - one day prior to the Settlement date (i.e. 12 noon on S -1 day).

Under what circumstances the trade will be rejected? :
The Clearing Corporation shall have the right to reject the trades reported to it by the members for settlement under the following conditions : o When the aggregate value of the deals done by the Member has exceeded his risk exposure limit. o When one of the counter-parties to the trade has been suspended or has been rendered ineligible to avail of the Clearing Corporation's Service whether temporarily or otherwise. o When one of the Counter-parties to the trade is no longer a Member. o When the deal/trade has been received by the CCIL from the Members after the cut-off timings rendering the Clearing and Settlement of the relative trade for that Settlement date impossible. o When there is any inaccuracy in the reporting of the trade/deal viz. incorrect format/data.

Will members need to communicate change in settlement instructions to CCIL? :
Each bank would need to designate one nostro account for settlement of CCIL transactions, and any change in the Settlement Instructions would need to be notified to CCIL at least seven days in advance. CCIL will broadcast any change in the Settlement Instructions of any of its Members to all the Members.

What is Net Debit Cap (NDC)? :
Net Debit Cap (NDC) is a limit set in dollars for each bank and the bank would not be allowed to run a Net Sold Position in excess of this limit on any given day. NDC is the upper limit and would be fixed on the basis of certain parameters such as Members Credit rating, Net worth, Asset value, Management quality etc.

What is Margin Factor? :
CCIL sets the Margin Factor for each Member. The member's margin factor is arrived at on the basis of its credit rating as determined by an independent rating agency, and the volatility factor in respect of USD - INR exchange rate for 3 days Holding period.

What is Settlement Guarantee Fund (SGF)? :
For mitigating CCIL's risk, members are required to contribute collateral to the Settlement Guarantee Fund in accordance with the policy laid down by CCIL from time to time. Currently the contribution amount is a factor of the member's NDC. The SGF contribution is payable in dollar funds. CCIL will invest the corpus in Short term US Government Securities and deposits, and distribute earnings arising out of such investments (net of costs ) to the members at semi-annual rests.

How is Exposure Verification Done? :
All the matched trades would be taken up for Exposure monitoring. This would be done in the morning batch for only those trades (both spot and forward) which fall due for settlement the next day. All forward trades would be validated and matched as and when reported but would be taken up for exposure monitoring only one day prior to Settlement date. Exposure would be checked against the Members Net Debit Cap (NDC). The trades which are not within the NDC limits would be rejected by CCIL. Any Member, desirous of a temporary enhancement in NDC, will be required to Pre-fund 100% of the amount exceeding NDC.

What is the process of Novation? :
Novation takes place when a new contract is substituted for an existing one between the same parties, or there is a change of parties, contract remaining the same. When a trade is reported to CCIL for settlement, CCIL becomes the central counterparty to the trade by replacing the trade between the two members. Novation is deemed to take place for all trades for which a Net Position is arrived at for a Member.

What are the information available to the Members through Reports? :

• Deal Status Report: This report lists all deals reported by a member on a particular day that have passed system validation, and gives the status of every deal reported on a particular day.

• Rejected Deals Report (Pre-settlement): This report consist of all deals that have been rejected on a particular day along with the rejected reason.

• Net Debit Cap Utilization Report: This report gives an overview of the Net Debit Cap of a Member for a particular settlement day, the Member's exposure for that day and the available limit for sale. This report is available at the end of Morning batch.

• Net Position Report: This report gives the final net position of a Member for a particular settlement day. The report gives details of the total buy and total sell trades' thus giving an account of how much a Member is required to pay or receive in both Rupee and Dollar terms. This report is generated after the Netting batch one day prior to the Settlement date.

• Settlement Status Report:

What is the process of Shortage Handling? :
The defaults by the Members could be either in USD or in INR. The treatment for handling the both are given below : Default in Payment of USD Obligation A member with a net payable position is said to have defaulted when it fails to credit part or the whole payable amount (in USD) to CCIL's account maintained with the Settlement Agent before the stipulated cut-off time on the value date. In such a case, CCIL will complete the US dollar leg of the settlement by drawing under the dollar line o

What is the Loss Allocation Procedure followed by CCIL? :
In case defaults by a Member (in USD/INR) remains outstanding for more than one business day, the Loss Allocation procedure will get automatically invoked. In such a case, the Settlement Loss will be first met out of the defaulting Member's contribution to the Settlement Guarantee Fund. In case the collateral contributed by the Member is insufficient for this purpose, the amount of shortfall would be apportioned to the surviving Members in proportion to their exposure to the defaulting Member on the given value date of default.

What are the transaction charges levied by CCIL? :
At present, Members would have to pay a fee of Rs. 100/- per transaction accepted for Settlement.

What are the advantages of settling trades through CCIL? :
Clearing Corporation offers the following benefits for the Members : o Assurance of settlement on the settlement date o Reduction in counterparty exposure. ( forex clearing & settlement, since a Loss Allocation Procedure is stipulated, the exposure will not get extinguished but will come down from the gross level to the net level.) o Operational efficiency o Easier reconciliation of accounts (in case of forex trades) o Lower operational cost

How will a Bank with Multi-locational Dealing Rooms report the deals to CCIL? :
At present, CCIL can receive deals from any branch of a bank which has Infinet connectivity. However, it is preferable that the Bank chooses a nodal place through which all the deals done through their various dealing rooms will be reported to CCIL since CCIL recognises each bank as a single entity and, only one correspondent bank per member bank is entered in CCIL's systems