Settlement Guarantee Fund of the Limited Purpose Clearing Corporation The Securities and Exchange Board of India has released the Framework for the Settlement Guarantee Fund of the Limited Purpose Clearing Corporation. Whereas the issuer will be informed as per the management policy.
Markets regulator Securities and Exchange Board of India ( SEBI ) has drawn up a framework for Settlement Guarantee Fund of Limited Purpose Clearing Corporation ( LPCC ), wherein funds will be collected upfront from eligible issuers by way of debt securities. .
LPCC is an entity set up for clearing and settlement of repurchase agreement transactions, for which SEBI has currently come out with a framework on upfront contribution.
Amount will be kept in escrow account
SEBI said that an amount of 0.5 basis points of the issue price of debt securities every year, depending on the maturity of the debt securities, will be taken by the stock exchanges and kept in an escrow account before allotment of debt securities. This amount applies to public issue or private placement of debt securities.
Payment will be done in one day
The Stock Exchange shall transfer the amount so collected to the bank account of the LPCC within one working day of receipt of the amount. Also, the details of the amount collected will also be displayed by the stock exchanges on their websites. According to the regulator, the new framework will come into effect from May 1 and eligible issuers will be notified by the LPCC as per its risk management policy. It will offer central counterparty services for repo transactions in debt securities.
LPCC was established in 2020
SEBI had approved the proposal for setting up of LPCC in September 2020. The Board had decided that an amount of 0.5 basis points of the issue value of debt securities should be collected every year prior to listing of such securities for creation of Settlement Guarantee Fund of LPCCs. AMC Repo Clearing Limited (ARCL) has been granted recognition by SEBI as LPCC. At the same time, the Reserve Bank of India has also approved ARCL to function as a Clearing Corporation with a limited purpose.
