Interoperability Deadline Extended for Market Participants

Stock exchanges and clearing corporations who are not able to meet the deadline of June 1, 2019, set by SEBI had requested for an extension of the deadline to shift to the interoperable framework.

To help these market participants implement the required systems and processes to achieve a smooth transition, all stock exchanges and clearing corporations have decided to extend the deadline by one month. The new deadline to meet the required changes is July 1, 2019.

All clearing corporations and stock exchanges have jointly agreed to extend the deadline for shifting to an interoperable framework by July 1, 2019. The Securities and Exchange Board of India (SEBI) had released guidelines for the framework in last November.

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The proposal of ‘interoperability’ addresses the substandard use of margin and capital in the equity market by linking the central counterparty (CCP) clearing houses and allows stock exchanges and clearing corporations to consolidate clearing and settlement functions at a single CCP.

The interoperable framework is expected to lead to an efficient allocation of the capital resources for market participants and saves cost by offering better trade executions.

Apart from the benefit of cost saving, it employs multilateral netting, which helps in improving the efficiency of the capital deployed by market participants. This facilitates market participants to participate in a wide range of trading platforms and encourages competition among CCPs in pricing and services.

Interoperability separates the execution risk from the settlement risk. This helps stock exchanges and clearing houses in squaring off their positions when there are outages in stock exchanges.