From UPSC perspective, the following things are important :
Prelims level: What is a Clearing Corporation?
Mains level: Significance of Usha Thorat Committee Reviewing the Ownership and Economic Structure of Clearing Corporations
Why in the news?
SEBI forms a committee to review clearing corporations’ ownership and economic structure, aiming to enhance resilience, independence, and neutrality as risk managers.
About the Securities and Exchange Board of India (SEBI):
|
What is a Clearing Corporation?
- A clearing corporation is a central counterparty (CCP) that provides clearing and settlement services for trades executed on various exchanges.
- It acts as an intermediary between buyers and sellers, guaranteeing the completion of transactions and managing counterparty risk.
- Clearing corporations ensure the smooth functioning of financial markets by facilitating the timely settlement of trades and reducing systemic risk.
About Usha Thorat Committee on Reviewing the Ownership and Economic Structure of Clearing Corporations:
- SEBI has formed a committee chaired by Usha Thorat, former Deputy Governor of the Reserve Bank of India (RBI), to review the ownership and economic structure of clearing corporations.
- The committee’s mandate includes examining the ownership structure and finances of clearing corporations to ensure their resilience, independence, and neutrality as risk managers.
- It will assess the feasibility of broadening the list of eligible investors allowed to hold stakes in clearing corporations and suggest categories of investors who can acquire such stakes.
- The committee will also explore alternative ownership structures and shareholding patterns suited to an interoperable environment, where clearing corporations provide services across multiple exchanges.
- It aims to propose alternatives that address the periodic capital needs of clearing corporations and ensure sufficient capital and liquidity during market-wide systemic stress.
- The current ownership structure of clearing corporations is dominated by the parent exchange, which exposes them to the expectations of shareholders of the parent exchange.
Conclusion: The Usha Thorat Committee aims to enhance the resilience and independence of clearing corporations by exploring alternative ownership structures and suggesting measures to ensure adequate capital and liquidity.
Mains PYQ:
Q The product diversification of financial institutions and insurance companies, resulting in overlapping of products and services strengthens the case for the merger of the two regulatory agencies, namely SEBI and IRDA. Justify.(UPSC IAS/2013)
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
