MUMBAI
:
Trade and settlement platform Clearing Corporation of India (CCIL) should explore putting in place necessary infrastructure to facilitate trading and settlement of currency pairs beyond just USD/INR, given the broader objective of internalisation of the rupee, Reserve Bank of India Governor Sanjay Malhotra said today.
Speaking at an event to mark the 25th anniversary of CCIL, Malhotra said that as new interest rate derivative products are introduced, CCIL could meet, and even anticipate, market demand and put in place the necessary infrastructure for the larger suite of products.
“It would be important for CCIL to continuously explore and enhance its product and service offerings on Forex Retail and the RBI Retail Direct, ensuring a seamless customer experience and robust system capabilities,” he said as a part of broader remarks on the way forward for CCIL and its role in maintaining market stability and liquidity.
CCIL’s offerings and products must be in sync with the evolving market, the governor said, adding that expanding the reach of platforms to wider market participants, such as corporates, non-residents, and investors, could enhance the available market liquidity and add to overall efficiencies. “Market liquidity is not only a function of volume and tighter bid-ask spreads but also of diversity of participants and views,” he said.
CCIL’s role and market growth
CCIL provides clearing, settlement and risk management services for various financial products, and acts as the central counter party (CCP) for government securities, money market instruments and foreign exchange. It also performs the function of a trade repository for over-the-counter derivatives.
CCIL clears all government securities and associated repo trades, 99% of the foreign exchange forwards, 88% of all MIBOR-based overnight index swaps (OIS), 50% of modified MIFOR-based OISs and more than 50% of the foreign exchange spot market.
Volumes of government securities trades on the platform have grown 12-fold from 151 lakh crore in FY10 to 1,857 lakh crore now; whereas in the foreign exchange segment, they have grown four times from $2.99 trillion in 2010 to $13.3 trillion. It also facilitates reporting of trades in gold derivatives and foreign exchange trades to the trade repository, including retail offerings.
“This promotes fair pricing, improved price delivery for customers to buy and sell US dollars,” Malhotra said, adding that the average trading volumes on the foreign exchange retail platform had increased gradually to around $95 million.
However, there is scope to improve, for which CCIL has now tied up with Bharat Connect to boost accessibility and consumer experience, and has rolled out a pilot with a few banks. The organization is also working on a mobile platform to help banks better onboard customers.
“This is an area in which more work needs to be done. We feel there is hope for improving and expanding access, improving price delivery, reducing costs, reducing mutual costs for individuals and MSMEs especially for smaller segments,” Malhotra said, adding that CCIL will have to continue with the “agility and innovation” that it has demonstrated so far to optimize and rationalise its risks. “One needs to continuously review, improve, improvise and further make innovations”.
What’s next
The user interface of the CCIL platform was another area of improvement flagged by Malhotra, who said users now want a better experience, much better functionalities and there is a need to make this interface easier and simple. This is partly possible through the use of algorithms, artificial intelligence and machine learning (AI & ML)-driven trading, and mobile trading applications.
“Increased integration of trading with real news platforms will help, and a shift to decentralized peer-to-peer platforms, tokenization of assets, etc. are some of the trends that one will have to watch out for,” Malhotra said, adding that CCIL cannot remain immune from developments such as electronic trading platforms becoming highly interactive, customer-experienced platforms, and offering increased utility and customization through intelligent virtual assistants, chatbots and other such technologies.
The governor said CCIL needs to continue to take the lead in embracing innovation, leveraging emerging technologies to increase efficiency, scalability, performance, security and reduce costs and turnaround times across different market segments.
