Depositories, Clearing Corporations to comply with global market principles from end of Dec: SEBI

Depositories and CCs will also have to carry out self-assessments on their compliance with these standards and make disclosures periodically on their websites, according to the latest circular issued by the market regulator

Depositories and clearing corporations (CCs) will now have to comply with the Principles of Financial Market Infrastructures (PFMIs), which are global standards prescribed to ensure that the infrastructures supporting the global financial markets are robust and resilient, according to a circular by the market regulator SEBI.

PFMIs have been prescribed by international bodies like the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO).

Depositories and CCs will also have to carry out self-assessments on their compliance with these standards and make disclosures periodically on their websites, according to the latest circular issued by the market regulator. These provisions will come into effect from the end of the December 2023 quarter, the circular added.

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The circular issued by the Securities and Exchange Board of India on December 19 stated, "SEBI regulated Depositories and Clearing Corporations are FMIs (Financial Market Infrastructures). These systemically important FMIs provide essential facilities and perform systemically critical functions in the market and shall be required to comply with the PFMIs specified by CPSS-IOSCO as applicable to them."

These decisions were taken based on the recommendation of the Secondary Market Advisory Committee of SEBI (SMAC). To operationalise this, 24 principles of FMIs have been classified as "quantitative" and "qualitative" and their applicability to CCs and depositories has been detailed in the circular.

For example, credit risk has been classified as quantitative and applies only to CCs, settlement finality has been classified as qualitative and applies only to CCs, and exchange-of-value settlement systems have been classified as quantitative and qualitative and apply only to CCs.

The self-assessment and disclosures of quantitative principles have to be done quarterly and of qualitative principles have to be done annually, both within 30 days from the end of that period.

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FMIs shall be monitored and assessed against the PFMIs on an annual basis by the Regulatory Oversight Committee (ROC) of the FMI and the ROC shall submit a report to the governing board of the FMI and SEBI within 60 days from the end of the financial year, said the circular.