These principles will apply to all clearing corporations and depositories present in the Indian securities market. They are aimed at enhancing safety and efficiency in payment, clearing and settlement arrangements, reducing the systemic risk, fostering transparency and financial stability, and protection of market participants and investors.
Issuing detailed guidelines for FMIs, SEBI said they will provide for effective regulation, supervision and oversight of such entities, which ensure clearing, settlement and upkeep of various securities, their trades and payments.
The 24 Principles for Financial Market Infrastructures (PFMIs) globally have been finalised by the International Organisation of Securities Commissions (IOSCO), a global body of securities regulators from across the world including SEBI.
They replace the three existing sets of international standards currently in use. The new guidelines require higher minimum requirements, provide detailed guidance and broaden the scope of the standards to cover new risk-management areas and new types of FMIs.
Being a member of IOSCO, SEBI said, it is "committed to the adoption and implementation of the new standards of PFMIs in its regulatory functions of oversight, supervision and governance of the key financial market infrastructures under its purview."
"All FMIs in the securities market shall be monitored and assessed against the PFMIs on a periodic basis," it added.
There are five FMIs present in the country on which the new rules would apply -- two depositories (Central Depository Services Ltd and National Securities Depository Ltd) and three clearing corporations (Indian Clearing Corporation Ltd, MCX-SX Clearing Corporation Ltd and National Securities Clearing Corporation Ltd).
"These systemically important financial infrastructures provide essential facilities and perform systemically critical functions in the market and shall hence be required to comply with the principles of financial market infrastructures specified by CPSS-IOSCO as applicable to them," SEBI said.
Among the principles -- FMIs need to have a well-founded, clear, transparent, enforceable legal basis for each material aspect of its activities.
They are required to have clear and transparent governance arrangements, sound risk-management framework to manage risk associated with credit, liquidity and legal. Besides, they need to have effective and clearly defined rules and procedures to manage a defaulter.
"An FMI that requires collateral to manage its or its participants' credit exposure need to accept collateral with low credit, liquidity, and market risks. They should also set and enforce appropriately conservative haircuts and concentration limits," SEBI noted.
Besides, it said that Central Counterparty (CCP) should cover its credit exposures to its participants for all products through an effective margin system that is risk-based and regularly reviewed.
"An FMI should conduct its money settlements in central bank money where practical and available. If central bank money is not used, an FMI should minimise and strictly control the credit and liquidity risk arising from the use of commercial bank money," the Indian regulator noted.
FMIs need to have objective, risk-based, and publicly disclosed criteria for participation, which permit fair and open access.