Money market is a market for short-term financial assets that are close substitutes of money.The most important feature of a money market instrument is that it is liquid and can be turnedinto money quickly at a low cost.
4.22 FIMMDA
The Fixed Income Money Market and Derivatives Association of India (FIMMDA), anassociation of Scheduled Commercial Banks, Public Financial Institutions, Primary Dealersand Insurance Companies was incorporated as a Company under section 25 of theCompanies Act1956 on June 3, 1998. FIMMDA is a voluntary market body for the bond,money and derivatives markets.
4.23 The Clearing Corporation of India Limited
The Clearing Corporation of India (CCIL) was set up to improve efficiency in the transaction settlement process, insulate the financial system from shocks emanating from operations related issues, and to undertake other related activities that would help to broaden and deepen the Money, Gilts and Forex markets in India. The role of CCIL is unique, as it provides guaranteed settlement of three different products under one umbrella.
Apart from settlement of trades, another major function of a Clearing Corporation is to reduce risks of its members from failed trades arising out of the defaults by their counterparties. By becoming central counterparty to the trades done by its members, the Corporation absorbs risk. It manages the risks through its risk management processes in such a manner that the ultimate risk to its members from fails is either eliminated or reduced to the minimum. Risk Management Department in CCIL has been entrusted with the responsibility of designing the Risk processes and its execution. The department is also responsible for keeping the processes efficient, current and user friendly.
The success of its money market product ‘CBLO’ has helped the market participants as well as the central bank to find a solution to unusual dependence on uncollateralized call market.
4.24 CLS (Continuous Linked Settlement):
CCIL started the settlement of cross currency deals of banks in India through the CLS Bank in April 2005. Through this arrangement, CCIL aggregates trades reported by all Member banks and enables banks to collectively enjoy the benefits of cross currency settlement through CLS Bank. This is a unique experiment whereby cross border settlement of an entire country is being achieved through a third party arrangement. Settlement through the CLS mechanism is on a payment versus payment basis.
4.25 CBLO (Collaterized Borrowing and Lending Obligation)
“Collateralized Borrowing and Lending Obligation (CBLO)”, as the name implies facilitates in a collateralized environment, borrowing and lending of funds to market participants who are admitted as members in CBLO Segment.
CBLO is conceived and developed by CCIL CBLO Dealing system, an anonymous order matching platform, is hosted and maintained by Clear corp Dealing Systems (India) Ltd, a fully owned subsidiary of CCIL.
CCIL becomes Central Counter party to all CBLO trades and guarantees settlement of CBLO trades. The borrowing and / or lending in CBLO is facilitated for a maximum tenor of one year. CBLO is traded on Yield Time priority.
The Funds settlement of members in CBLO segment is achieved in the books of RBI for members who maintain an RBI Current Account and are allowed to operate that current account for settlement of their secondary market transactions. In respect of other members, CBLO Funds settlement is achieved in the books of Settlement Bank.