CCIL
Also written Clearing Corporation of India Ltd · Clearing Corporation of India Limited
The Clearing Corporation of India Ltd, the central counterparty that guarantees settlement of government securities, repo and OTC interest rate derivative trades by novation.
In plain language
Trades in listed shares settle through the exchange's own clearing corporation. Government securities, repos and many interest rate derivatives are not listed on an exchange at all — they trade over the counter. They still need somebody to guarantee settlement, and that somebody is CCIL.
CCIL sits in the middle of these OTC trades the same way an exchange's clearing corporation sits in the middle of listed ones: by novation, becoming the buyer to every seller and the seller to every buyer, so neither side is exposed to the other's default.
It is not limited to one market. CCIL clears government securities, runs the triparty repo platform, calculates a key overnight interest-rate benchmark, and increasingly offers the same guarantee for OTC interest rate derivatives.
How it works
For government securities (Chapter 18), all outright secondary market transactions settle on a T+1 basis. Settlement runs on a net basis through Delivery versus Payment System-III (DvP-III), and CCIL guarantees settlement of trades on the settlement date by becoming central counterparty through novation — seller to the buyer, buyer to the seller.
CCIL's role extends across several linked markets: it operates the Tri-Party Repo Dealing System (TREPS) as CCP for triparty repo against government securities — the earlier CBLO structure, launched by CCIL on 20 January 2003, was converted to TREP on 5 November 2018; it settles CROMS repo trades against G-secs alongside the underlying securities; and it acts as Calculation Agent for the overnight MIBOR benchmark administered by the Financial Benchmarks India Pvt. Ltd (FBIL). In Chapter 19, CCIL is separately named as offering CCP services for OTC interest rate derivative settlement, including as the clearing agency for physically-settled bond forwards.
A worked example
Illustrative — the settlement mechanics are the workbook's; the trade size is constructed to show the arithmetic.
A bank buys Rs 50 crore face value of a government security from a primary dealer on Monday. Under the T+1 rule, settlement happens on Tuesday.
CCIL inserts itself into the trade by novation: the bank's counterparty for settlement purposes becomes CCIL, not the primary dealer. If the primary dealer defaulted overnight, the bank would still receive its securities — CCIL guarantees the trade, and pursues the defaulting dealer itself.
The same bank, needing overnight funds, separately borrows Rs 20 crore on the TREPS platform against government securities as collateral, with CCIL again standing as central counterparty to that triparty repo.
Why NISM asks about it
Chapter 18 (Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Markets) covers CCIL's role in G-Sec settlement, TREPS and MIBOR in detail; Chapter 19 (Interest Rate Derivatives) names CCIL as CCP for OTC interest rate derivatives including bond forwards. Expect a question on the settlement cycle for G-Secs (T+1) or on which body guarantees OTC interest rate derivative settlement.
Common exam traps
- CCIL is not a stock exchange clearing corporation — it clears OTC and money-market instruments (G-Secs, repo, CROMS, some interest rate derivatives), a different segment from NSE/BSE's own clearing corporations for listed products.
- G-Sec settlement is T+1, on a net basis through DvP-III — a specific figure worth memorising.
- CBLO and TREPS are not the same name for two different eras of the same thing to be confused with different products — CBLO (from 2003) was converted into TREP in 2018; both were/are CCIL-operated.
- CCIL is the Calculation Agent for MIBOR, while FBIL administers it — two different bodies with two different roles in the same benchmark.
Where this is taught
Free preparation for NISM Series V-DRelated terms
- Clearing corporationThe entity that steps between every buyer and seller in the derivatives segment by novation, becoming the counterparty to both sides and guaranteeing that the trade settles.
- FBIL reference rateThe daily USD/INR (and EUR, GBP, JPY vs INR) benchmark rate published by Financial Benchmarks India Pvt Ltd around 1.30 pm; it is the final settlement price of INR currency futures and options.
- Spot value dateThe settlement date of a standard spot FX deal — the second business day after the trade, provided both currency centres are open; earlier dates are cash (T) and tom (T+1).
- Counterparty credit riskThe risk that the other party to an OTC derivative fails before the settlement date. It does not arise in exchange-traded derivatives, where the clearing corporation becomes central counterparty.
- FX-RetailThe electronic platform for buying and selling foreign exchange by retail customers of banks, introduced by the RBI in 2019 and rolled out by CCIL on 05 August 2019 to make retail forex pricing transparent.
- Cash and tomThe two pre-spot settlement dates in the FX market: cash (or ready) settles the same day, tom settles the next business day, and both their rates are derived from the spot price rather than traded.
- Foreign exchange forwardAn OTC derivative involving the exchange of two currencies on a specified future date more than two business days away, at a rate agreed on the date of the contract.
- Foreign exchange swapAn OTC derivative in which two currencies are actually exchanged on one date (the short leg) and re-exchanged at a later date (the long leg), at rates agreed at the time of the contract.
- Triparty repoA repo in which a third party, the Triparty Agent, handles collateral selection, payment and settlement, custody and management between borrower and lender.