LPCC is an entity established to carry out the clearing and settlement of repo transactions.
In September 2020, the Sebi board approved a proposal to facilitate the establishment of an LPCC.
Sebi, the capital markets regulator, has changed its brokerage rule regarding the registration of entities to participate in the corporate bond tri-party repo segment, a move that will increase liquidity in the segment.
“No separate registration is required for an individual registered with the limited liability clearing company as a participant to participate in the tri-party repo segment for conducting proprietary corporate bond transactions,” the Securities and Exchange Board of India (Sebi) said in a notice issued Monday.
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The move came after Sebi’s board approved last month a proposal to further facilitate participation by entities seeking direct participation (not through a clearing member) in corporate bond repurchase transactions conducted by the Limited Purpose Clearing Corporation (LPCC).
LPCC is an entity established to carry out the clearing and settlement of repo transactions.
It is expected to facilitate active trading, especially by market makers, by allowing them to fund their inventory of bond holdings through an active repo market. This, in turn, is expected to improve liquidity in the corporate bond market.
In September 2020, the Sebi board approved a proposal to facilitate the establishment of an LPCC.
Separately, the regulator has adjusted the rules for securities contracts.
Under the new rule, in the event that a clearing member or participant defaults on its settlement obligations, the Fund would be used to complete settlement.
Furthermore, the Fund’s corpus must be sufficient to meet the settlement obligations arising from the default of a clearing member or participant.
Each approved clearing house must establish and maintain a Fund to ensure the settlement of transactions executed in respective segments of a recognized stock exchange.
(This story has not been edited by News18 staff and was published from a syndicated news agency feed – PTI)
