NSE Clearing Limited prioritises robustness, consistency, transparency in risk management, market resilience and technological solutions, according to its managing director and CEO, Vikram Kothari.
NSE Clearing Limited (NCL), a wholly owned subsidiary of NSE, is the leading CCP in India, clearing more than 95% of the trades executed in equity and equity derivatives. The CCP is the first clearing corporation in India, as well as the first to introduce settlement guarantee.
NCL is recognised as Qualified Central Counterparty by Securities Exchange Board of India and as TC-CPP under the UK’s Temporary Recognition Regime. It also has a ‘CCR AAA/Stable’ corporate credit rating from CRISIL. As the counterparty to every trade by novation, NCL ensures settlement obligations are met even in the event of member defaults.
Risk management
A distinguishing attribute of NCL is its sound risk management. NCL’s risk management philosophy extends beyond its protection from various risks and places equal emphasis on minimising the infrastructure and intermediary risk for the investor community it serves.
The CCP ensures the adequacy of financial resources, including the Core Settlement Guarantee Fund (Core SGF), at all times to maintain financial stability in all circumstances. The corpus of Core SGF of NCL as of 30 November 2024 is Rs.11,400 crores ($1.35 billion).
Collateral management
NCL follows best practices under the Principles for Financial Market Infrastructures (PFMI) guidelines, managing client collateral segregated at the client level. This covers over 100 million investors across various asset classes, amounting to Rs.7.4 lakh crores ($87 billion).
Clearing and settlement
India was one of the first countries to implement T+1 settlement for equities, ahead of many global markets considering moving by 2027. NCL made the necessary technological adjustments to shorten settlement cycles by one day without changing trade confirmation timings. Additionally, NCL offers T+0 settlement for non-custodians in the cash market, with plans to extend this to custodians in May 2025.
Various transformational reforms for market safety
In the past 12-18 months, NCL has introduced several reforms to improve market safety. These include individual segregation of collateral for all end-customer accounts, validation of customer securities movement in depository accounts, and a unique SaaS portability model with other CCPs. Other initiatives include a paperless collateral management system and a UPI block facility for the domestic segment.
Software-as-a-Service (SaaS)
NCL has adopted a unique SaaS model with interoperable CCPs, offering their systems as redundancy to each other. While CCPs traditionally ensure business continuity through hardware redundancy, the SaaS model adds an additional layer of resiliency, protecting against software disruptions
Industry engagement
NCL is a member of international associations such as ISSA and CCP12, where it shares best practices and collaborates with industry stakeholders. NCL has played an active role in working groups with regulators, contributing to the development of regulatory frameworks and the launch of new products. These initiatives have led to improved market operations, better customer protection, and reduced monitoring costs.