FIMMDA
Also written Fixed Income Money Market and Derivatives Association of India
The Fixed Income Money Market and Derivatives Association of India, a self-regulatory body that issues operational guidelines for India's debt, money market and derivatives markets.
In plain language
FIMMDA stands for the Fixed Income Money Market and Derivatives Association of India. It is an industry body for India's debt markets.
RBI sets the rules for these markets. FIMMDA then writes the operational guidelines. Those guidelines tell the market how to actually process a trade — for example, how a commercial paper gets redeemed.
How it works
The workbook's own example of FIMMDA at work is the commercial paper redemption process. Following the RBI Commercial Paper Directions, 2017 (issued 10 August 2017) and FIMMDA's Operational guidelines on Commercial Paper (issued 5 October 2017), investors were no longer required to transfer commercial paper held in their beneficial owner accounts to an Issuing and Paying Agent's (IPA) redemption account for redemption. Instead, commercial papers are extinguished directly from the beneficial owner's account through a corporate action, for the specific purpose of redemption.
The pattern is a recurring one in India's debt market: RBI sets the regulatory direction, and FIMMDA follows with the operational guidelines that tell market participants and depository system operators exactly how to execute it.
A worked example
Before October 2017, an investor holding commercial paper wanting redemption at maturity had to first transfer the CP into the IPA's redemption account, adding a step and a settlement risk window between the investor's account and final payment.
Under RBI's August 2017 Directions and FIMMDA's October 2017 operational guidelines, that transfer step is removed: the CP is extinguished directly from the investor's own beneficial owner account through a corporate action initiated at maturity, and redemption proceeds go straight to the investor without the CP ever sitting in an intermediary redemption account.
Why NISM asks about it
Chapter 11, section 11.3 (Special Services — Debt Instruments), in the discussion of commercial paper redemption. Expect FIMMDA tested by name expansion and by its role in the CP redemption process — specifically the shift to direct extinguishment from the beneficial owner's account, dated to its October 2017 operational guidelines following RBI's August 2017 Directions.
Common exam traps
- FIMMDA issues operational guidelines; RBI issues the underlying Directions. Do not credit FIMMDA with the regulatory authority that sits with RBI — FIMMDA's guidelines implement what RBI has already directed.
- The commercial paper redemption change removed a transfer-to-IPA step — candidates sometimes describe this backwards, as CP being transferred into an IPA account for redemption, which is precisely the old process the 2017 guidelines replaced.
- FIMMDA's two 2017 dates are close together and easily swapped: RBI Directions, 10 August 2017; FIMMDA operational guidelines, 5 October 2017.
Where this is taught
- Series IV · Chapter 8: Regulatory Environment for Exchange Traded IRDintroduced here
- Series XIX-B · Chapter 8: Valuationintroduced here
- Series XXI-B · Chapter 5: Derivativesintroduced here
- Series VI · Chapter 11: Special Services - Debt Instruments & Government Securitiesintroduced here
- Series V-D · Chapter 20: Exchange Traded Interest Rate Futuresintroduced here
- Series X-A · Chapter 10: Understanding Derivativesintroduced here
Related terms
- Government SecurityA tradeable debt instrument issued by the Central Government or a State Government — treated as free of default risk, and the benchmark against which other rupee interest rates are priced.
- NDS-OMRBI's anonymous, order-matching electronic trading platform for government securities, now extended — through demat accounts with bank Participants — to retail investors, not only SGL/CSGL account holders.