In what ways does the interoperability strengthen the regulatory supervision over stocks and commodities market by SEBI? Elaborate. (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 5 years
KEY POINTS
· Interoperability of clearing corporations can reduce trading or impact costs, improve trade execution, and maintain optimal utilisation of margin and capital resources in securities market.
· It gives choices to trading member/market participants to consolidate and clear their trade through a clearing corporation of their choice instead of going through the concerned exchange where the trade is held.
· It curbs potential chances of trade disruption due to any systematic risk occurring on one exchange and the member would be able to trade on other exchanges without paying additional margin that can foster efficiency in the capital market and enable members participate in broad-based and product-driven trading platforms.
· It can catalyse competition among existing clearing houses in terms of prices and services they offer, and can affect their margin requirement from the members and commission they charge on clearing.
· It can potentially discourage the possibilities of inter-exchange arbitrage and agency risk since the working of clearing corporations together may bring down the inefficiency issue and improve market microstructure.
· A peer-to-peer interoperable framework can potentially mitigate inter-clearing corporation default risk through existing margining system and deployment of additional financial resources.
· Additional capital may be required to maintain as a buffer and aid in the absorption of losses due to default by an interoperable clearing corporation that is not linked to core settlement guarantee fund.
