March 20, 2013
- All Stock Exchanges & Clearing Corporations
- All Registered FIIs and Custodians
Sir / Madam,
Sub: Corporate bonds and Government securities as collateral
1. Please refer to SEBI circular Nos. SEBI/DNPD/Cir- 32/2007 dated September 11, 2007 and CIR/MRD/DP/15/2010 dated April 28, 2010 permitting FIIs to offer, as collateral, cash and foreign sovereign securities with AAA rating in F&O segment and cash, foreign sovereign securities with AAA rating and government securities in cash segment.
i) The bonds shall have a rating of AA or above (or with similar rating nomenclature) by recognised credit rating agencies.
ii) The bonds shall be in dematerialized form.
iii) The bonds shall be treated as part of the non-cash component of the liquid assets of the clearing member and shall not exceed 10% of the total liquid assets of the clearing member.
iv) The bonds shall have a fixed percentage based or VaR based haircut. A higher haircut may be considered to cover the expected time frame for liquidation. To begin with the haircut shall be a minimum of 10%.
6. The earlier circulars issued by SEBI with regard to acceptance of collaterals stand modified accordingly.
7. The Stock Exchanges/Clearing Corporations are advised to:
- make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.
- bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange/Clearing Corporation and also to disseminate the same on the website.
- communicate to SEBI, the status of the implementation of this circular in the Monthly Development Report.
8. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Deputy General Manager
Division of Risk Management and New Products
Market Regulation Department