Introduction: Collateralized Borrowing and Lending Obligation (CBLO)", as the name implies is a fully collateralized and secured instrument

for borrowing / lending money. CBLO as a product is conceived and developed by CCIL for the facilitating deployment in a collateralized environment. As a product, CBLO aims to benefit those entities who have been phased out of Call/ Notice money market and / or those entities on restrictions have been placed on the borrowing / lending in call / notice money market. CBLO Dealing system is hosted and maintained by Clearcorp Dealing Systems (India) Ltd, a fully owned subsidiary of CCIL. CCIL becomes Central Counterparty to all CBLO trades and guarantees settlement of CBLO trades. CBLO is an RBI approved money market instrument which can be issued for a maximum tenor of one year. CBLO is a discounted instrument traded on Yield Time priority. CBLO instrument that are generally made available for trading are those with maturity of next seven business days and three month end dates. The balances are maintained in electronic book entry. The access to CBLO Dealing system for NDS Members is made available through INFINET and for non NDS Members through Internet. The Funds settlement of members in CBLO segment is achieved in the books of RBI for members who maintain an RBI Current Account and are allowed to operate that current account for settlement of their secondary market transactions. In respect of other members, CBLO Funds settlement is achieved in the books of Settlement Bank. What is CBLO? CBLO: Is an RBI approved Money Market instrument; Is an instrument backed by Gilts as Collaterals; Creates an Obligation on the borrower to repay the money borrowed along with interest on a predetermined future date; A Right and Authority to the lender to receive money lent along with interest on a predetermined future date; Creates a charge on the Collaterals deposited by the Borrower with CCIL for the purpose; Membership: Membership to CBLO segment is generally extended to Repo eligible entities as per RBI guidelines. CBLO Membership is granted to NDS Members and non NDS Members. The entity type eligible for CBLO Membership are Nationalized Banks, Private Banks, Foreign Banks, Co-operative Banks, Financial Institutions, Insurance Companies, Mutual Funds, Primary Dealers, Bank cum Primary Dealers, NBFC, Corporate, Provident/ Pension Funds etc. Entities who have been granted CBLO Membership are classified based on their NDS Membership. CBLO Members who are also NDS Members are CBLO (NDS) Members and other CBLO Members are CBLO (Non NDS) Members or Associate Members.

Eligible Securities: Eligible securities are Central Government securities including Treasury Bills as specified by CCIL from time to time.

DEALINGS:
Borrowing Limit and Initial Margin Borrowing limit for the members is derived based on mark to market values and haircuts applicable on securities deposited by that member in CBLO segment. The members can borrow up a maximum of Borrowing Limit including all amounts which are borrowed and outstanding at that point in time. Members are required to deposit initial margin generally in the form of Cash (minimum Rs.1 lac) and Government Securities. Initial margin is computed at the rate of 0.50% on the total amount borrowed/lent by the members. CBLO members may seek intraday enhancement of BL/ IM by depositing additional collaterals/ Government Securities/ Cash. Similarly, Members may withdraw securities intraday from CBLO segment provided they are unencumbered. However, one day prior notice is required for cash withdrawal.

Dealing Auction Market Auction market is available only to NDS Members having settlement a/c at RBI, for overnight borrowing and settlement on T+0 basis. Access to auction market is not available to Associate members. Based on the borrowing limits fixed by CCIL, members submit their borrowing requests to Clearcorp through CBLO System indicating clearly the amount, maturity and the cap rate before commencement of the auction session. Members are permitted to borrow and lend funds on overnight basis indicating the cap rate/s which is/are linked to CCBOR (a cap rate is the maximum rate up to which the borrower is willing to pay). Currently the permissible caps are: a) CCBOR b) CCBOR + 10 bps c) CCBOR 10 bps d) No cap specified. Clearcorp approves the requests of the members subject to availability of borrowing limit and places the same on the specified auction windows on behalf of the borrowing members. The lenders willing to lend place their bids directly on the respective auction window indicating the amount and the rate during the auction market session. At the end of the Auction market session, Clearcorp initiates auction matching process based on

Uniform Yield principle. The successful borrowers and lenders are notified well before the close of business hours regarding borrowing and lending of funds by them through the dealing system.

Normal Market CBLO Normal market is available to both CBLO (NDS) members and Associate members. The access to CBLO (NDS) members is made available through INFINET whereas Associate members are provided access through Internet. Members have to deposit Cash and/ or eligible securities prior to starting CBLO Dealing operations. The limits are made available to members based on cash / eligible securities deposited with CCIL for that purpose in CBLO Segment. CBLO Members can place borrow / lend orders till the closure of market hours for T+0 settlement type for the same day settlement and till closure of market hours for T+1 settlement type for settlement on next business day. The maturity or redemption date of CBLO can be identified from the nomenclature of CBLO itself which captures as part of the description the maturity or redemption date of CBLO. The CBLO are issued at par for a particular maturity date which implies that CBLO shall be redeemed at par. CBLO are traded in the secondary market at a discount to redemption or par value. The borrowing and lending orders match on Yield Time priority. The Borrow limit and Initial Margin are blocked on post trade basis and hence the onus is on the members to ensure prior to placing the order that sufficient BL and IM are available. Borrow order implies that the member is selling CBLO whereas Lend order implies that the member is buying CBLO.

CBLO Market Timing CBLO Normal Market is available for all members (including Associate Members) for settlement on T+0 and T+1 basis. CBLO Auction market is available for only for NDS members having settlement account at RBI and T+0 settlement type. The CBLO Normal market timing for settlement type T+0 and T+1 for various business days shall be as decided by Clearcorp and notified from time to time. The CBLO Normal market time for T+0 and T+1 valid now is available under notifications of Clearcorp Dealing Systems (India) Ltd.

Clearing & Settlement:

CBLO operates on a Straight through Processing (STP) environment. The trade flows from CBLO Dealing System for Clearing and Settlement. The trades received are novated

and netted for settlement. A single obligation is generated for each member for each settlement date by netting trades received for settlement that business date with redemption obligation for the same date. The funds settlement is achieved at Settlement Bank for those CBLO members who are either not permitted to open a current account at RBI or those who are permitted and maintain a current accout are not allowed to operate those current account for settlement of secondary market transactions. CBLO Funds settlement is achieved at RBI for those members who maintain current account at RBI and are allowed to settle secondary market transactions in such account. The securities of equivalent value are blocked for members utilizing borrow limits. CBLO credits in the form of book entry are given to those members who have lent funds after the CBLO Funds settlement is completed. A report is made available giving details of securities encumbered in CBLO segment.

CBLO Funds Settlement @ Settlement Bank : The net fund obligation in CBLO Segment for those members who either do not maintain a Current Account with RBI or not allowed to operate such current account for settlement of secondary market transactions are achieved at Settlement Bank. A single obligation generated for such members CBLO Funds obligations is transmitted electronically to the Settlement Bank containing details of Funds Pay-in and Pay-out to be effected by the respective Settlement Bank. The Settlement Bank shall after effecting such Pay-in and Pay-out, confirm back electronically the completion of such process. The onus on ensuring that sufficient funds are made available in the respective current account with Settlement Bank rests with the CBLO members settling through Settlement Bank. CBLO Funds Settlement @ RBI Current Account: The funds settlement for those members who maintain a Current Account with RBI and are allowed to settle secondary market transactions in that current account is achieved in RBI Current Account of those members. A single funds obligations for CBLO segment is generated for each of these members which include Pay-in and Pay-out positions in respect of their proprietary positions and also on account of those obligations of other members for whom they have undertaken the function as a Settlement Bank.

Risk Management: CCIL addresses risk relating to trading and settlement by adopting stringent membership norms by restricting its membership only to the entities which meet the minimum eligibility criteria. Members are allowed to borrow to the extent of the limit fixed after MTM valuation of securities with appropriate haircut. The securities in the CSGL account are subjected to daily valuation and any deficit in the value of the securities vis--vis the borrowed amount (face value of CBLO) is collected from the concerned members.

Besides, CCIL stipulates initial margin for the lenders in the Auction market and for each bid and offer in the Normal market to address the interest rate risk, in case the lenders do not honor their commitments. In case of members failure to deposit such deficit on the same day, it is treated as a Margin Default and penalty is charged accordingly.

Default handling: (i) Funds Shortage : Shortfall in funds can take place when the members (by lenders on the day of lending and by borrowers on the day of redemption) fail to meet funds obligation on the day of settlement. In such cases, CCIL meets the shortage by utilizing the lines of credit extended by the member banks / Settlement Banks and complete the settlement. CCIL then initiates the default handling process by withholding the CBLO receivable by the lenders (defaulting members). In case of failure by the borrower to meet the redemption proceeds on maturity of CBLO, the underlying securities of such member stands encumbered till the funds are replenished along with charges. In case of eventual default, CCIL liquidates the underlying securities / CBLO and adjust the proceeds towards the shortfall and other charges.

(ii) CBLO Shortage : CBLO shortage can take place when the members Borrow / sell CBLO without having sufficient borrowing limit or concerned CBLO in their account. In case of CBLO shortfall, CCIL withholds the funds receivable by the defaulting members and creates CBLO to the extent of CBLO shortfall quantity by using the withheld funds and credit the same to the concerned buyers CBLO account. Alternatively, CCIL may also opt for Close-out process by reducing the CBLO shortfall quantity proportionately from the buyers (lenders) receivable position in the concerned CBLO.

Revised Schedule of Charges w.e.f. 1st January, 2010: The charges for CBLO trades in the Auction Market and Normal Market are as under: A. Transaction Charges (Clear Corp): Sr. No.
1.

Particulars
AUCTION MARKET NORMAL

Charges
Rs. 5/- per crore of face value per trade per Member subject to minimum of Rs. 5/- and a maximum of Rs. 500/- per trade. Rs. 5/- per crore of face value per trade per member subject

2.

MARKET (to be charged on the value date of each trade)

to minimum of Rs. 5/- and a maximum of Rs. 500/- per trade.

B. Settlement Charges (CCIL): Sr. No.

1.

Particulars
AUCTION MARKET

Charges
Rs. 10/- per crore of face value per trade per member subject to minimum of Rs. 10/- and a maximum of Rs. 1000/- per trade for each member to be charged at the time of initial borrowing and lending Plus Applicable Service Tax. Rs. 10/- per crore of face value per trade per member subject to minimum of Rs. 10/- and a maximum of Rs. 1000/- per trade Plus Applicable Service Tax.

2.

NORMAL MARKET

DEFAULT CHARGES Sr. No.

1

Particulars
Delayed deposit of Margin

Charges
5 basis points per day on the amount of shortfall till the shortfall are met. 5 basis point per day on the amount of shortage/default till the shortage/default is fully met; of which, 3 basis point per

Default

day will be payable to the non-defaulting Member on the shortfall. (Minimum charges would be Rs. 100/-)

1.

What is Collateralised Borrowing & Lending Obligation (CBLO)?

CBLO 1.Is an RBI approved Money Market instrument; 2.Is an instrument backed by Gilts as Collaterals 3.Creates an Obligation on the borrower to repay the money borrowed along with interest on a predetermined future date; 4.A Right and Authority to the lender to receive money lent along with interest on a predetermined future date; 5.Creates a charge on the Collaterals deposited by the Borrower with CCIL for the purpose.

2.

Which type of entities is granted membership to CBLO segment?

Membership to CBLO segment is generally extended to Repo eligible entities as per RBI guidelines. CBLO Membership is granted to NDS Members and non NDS Members. The entity type eligible for CBLO Membership are Nationalized Banks, Private Banks, Foreign Banks, Co-operative Banks, Financial Institutions, Insurance Companies, Mutual Funds, Primary Dealers, Bank cum Primary Dealers, NBFC, Corporate, Provident/ Pension Funds etc.

3.

What is the difference between a Member and an Associate Member?

An entity which is eligible to maintain Current account and SGL account with RBI is called a Member in CBLO Segment. All other entities which are not eligible to maintain Current account and SGL account with RBI are referred to as Associate Members in CBLO Segment. However, in the ensuing FAQ, Members include Associate Members unless and otherwise specifically mentioned.

4.

How can one obtain Membership of CCIL to CBLO segment?

Eligible entities desirous of becoming Members to CBLO segment submit applications to CCIL and CCDS seperately along with two cheques of Rs 25000/- each favoring The Clearing Corporation of India Limited and ClearCorp Dealing Systems (India) Limited, towards one time membership fee. As soon as the applications for Membership is approved by CCIL and CCDS, the concerned members are required to execute legal documents like Power of Attorney, mandate in the prescribed formats, which will be forwarded by CCIL and CCDS. The above membership will be approved and valid for undertaking CBLO transactions through the trading system offered by CCDS and settling CBLO transactions through CCIL. (Note: Please refer to FAQs under Membership for Eligibility Criteria and detailed description of procedure for obtaining membership.) 5. How can one obtain Associate Membership of CCIL to CBLO segment?

Eligible entities desirous of becoming Members to CBLO segment submit applications to CCIL and CCDS seperately along with two cheques of Rs 25000/- each favoring The Clearing Corporation of India Limited and ClearCorp Dealing Systems (India) Limited, towards one time membership fee. As soon as the applications for Membership is approved by CCIL and CCDS, the concerned members are required to execute legal documents like Power of Attorney, mandate in the prescribed formats, which will be forwarded by CCIL and CCDS. The above membership will be approved and valid for undertaking CBLO transactions through the trading system offered by CCDS and settling CBLO transactions through CCIL. (Note: Please refer to FAQs under Membership for Eligibility Criteria and detailed description of procedure for obtaining membership.) 6. Where does an Associate Member maintain its Current Account and GILT A/c?

An Associate Member is required to maintain an exclusive Current Account for settlement of CBLO transactions with any one of the Settlement Banks designated by CCIL, .An Associate Member can maintain its GILT a/c with any custodian bank.

7.

What is CBLO Dealing System?

CBLO Dealing System is an automated order driven, on-line anonymous matching System provided by CCDS to enable Members to borrow and lend funds against CBLO. It also disseminates online information regarding deals concluded, volumes, rate etc., and such other notifications as relevant to CBLO market. 8. What are the modes of access to CBLO Dealing System?

Members can access CBLO Dealing System through INFINET connectivity whereas Associate Members can access CBLO Dealing System through internet. 9. What are the hardware / software requirements for CBLO Dealing System?

The hardware and software requirements for CBLO (NDS) Members and Associate members are given in CCIL website under sub menu IT Infrastructure of CBLO. 10. Who issues the Digital Certificates and what are the charges?

The hardware and softwareThe Digital Certificates are issued by IDRBT for CBLO (NDS) Members. The Digital Certificates for Associate Members is issued by NDS-IT on receiving a request from Clearcorp. As the onus of obtaining the Digital Certificates in respect of CBLO (NDS) Members rests with the member themselves, the member has to obtain the requisite Digital Certificate and submit it to Clearcorp / CCIL. Hence, no charges would be recovered from CBLO (NDS) Members for Digital Certificate. However, in respect of Associate Members, the Digital Certificate request will be sent by Clearcorp / CCIL based on a request received from Member. The charges applicable at that point in time shall be payable by Associate Members both in respect of Digital Certificate and E Token. 11. When can one start using the CBLO Dealing System?

An Entity shall be provided access to the CBLO Dealing System only after cash deposit of Rs.1 lakh towards Initial Margin is received and his Membership to CBLO Segment is approved by Clearcorp and CCIL. An entity approved as a CBLO Member shall be provided a Member ID, Member Number and two User names which are unique within the member. The Member may request for customized User names and on receiving in appropriate format, the same shall be created by CBLO Admin. The User can access the CBLO Dealing System by logging in with User name (ID) and password communicated to him. The system would as part of password policy implemented by Clearcorp / CCIL, prompt the user to change the password immediately on his logging in to the system. 12. What are the charges payable for dealing and settlement in the CBLO Segment?

The Trading and Settlement charges payable by member/s in CBLO Segment are available under notifications. 13. For which maturities are CBLO available in the CBLO market?

CBLO instruments with maturity dates of next seven business days and immediate three month end dates are generally made available for settlement type T+0 and T+1.

14.

What are the types of markets available under CBLO segment?

Two types of markets available to CBLO Dealing System Members are CBLO Normal market and the CBLO Auction market. CBLO Normal market facilitates borrowing and lending by members on an online basis whereas CBLO Auction market facilitates borrowing and lending by members through submission of bids and offers in the system and its acceptance and announcement of cut off by Clearcorp. The orders get matched in CBLO Normal market on Yield Time priority among the orders present at that point in time whereas the bids and offers result in to trades in CBLO Auction market after the Auction market closes and cut off determined by Clearcorp (Please note that the Auction market is not available to CBLO (NDS) Members settling at Settlement Bank and CBLO Associate members).

15.

What is the minimum and multiple order lot size in CBLO Normal and Auction market?

The minimum lot size is the order size quantity below which system would not accept orders and multiple lot size is the lot size in which the system would accept orders, if the orders are above the minimum lot size. The minimum and multiple lot size for CBLO Normal market is Rs.5 lakhs. The minimum lot size for CBLO Auction market is Rs.50 lakhs and multiple lot size is Rs.5 lakhs.

16.

What is meant by Single Order Limit (SOL)?

Single Order Limit is the maximum amount that can be entered by a member per order and it is applicable to each member of the CBLO Segment.

17.

How is the consideration amount for the deal computed?

The consideration amount for the deal is computed based on the yield at which the deal is concluded based on the following formula. Consideration amount =Face Value/{1+ (yield/36500*holding period in days)}

18.

What is Uniform cut-off yield and how is it computed?

Uniform cut-off yield is applicable only to the auction market and it refers to allotment of bids at a uniform cut-off yield. The same rate is made applicable across all successful borrowers and lenders. In the auction market, all the bids for a particular CBLO is arranged in ascending order of their yields i.e the lender willing to lend at the lowest yield is at the first row followed by the second lowest and so on. In case there are two identical bids (in terms of yield), they are arranged on time priority basis. Similarly the offer orders for the same CBLO or the Borrow quotes would be arranged in descending order of yields i.e. the member willing to borrow at the highest yield on the first row followed by the next highest and so on. The cut-off yield determined is at such yield wherein the borrow amount at or above such yield is equal to the lend amount at or below such yield.

19. What would be the status of the outstanding orders when a member logs out from the system?
When a Member logs off the system, the member is given an option to either cancel all outstanding orders or to retain the orders in the system.

20. What happens to the outstanding orders if the PC on which CBLO Dealer Terminal is installed abruptly shuts down?
The outstanding orders of the dealer, if any, remain in the order book.

21.

What are CSV reports? When are they generated? Where can they be saved?

CSV stands for Comma Separated Value. A .CSV is generated every time a print command is triggered for a Deal ticket or any report from Dealer Work Station(DWS). A .CSV is generated when a deal ticket automatically printed on conclusion of a trade. .CSVs is normally stored in the C drive of the PC wherein the DWS is logged in. However, facility is provided for members to configure the path to any folder in a common drive and once configured, all .CSVs will get stored automatically in the designated folder.

22.

Is a member required to manually initiate the generation of Deal Tickets?

Deal Tickets are automatically generated by the CBLO Dealing system after every trade and a hard copy is printed by the printer configured to the system.

23.

Can a member generate a particular deal ticket more than once?

A member can reprint a deal ticket any number of times by selecting the particular trade in the Previous Trades Query and clicking on PRINT. Members can also generate a summary report of all his trades by loading the Previous Trades Query and clicking PRINT.

24. Can deals be uploaded from CBLO Dealing System in to the proprietary system of the Member?

Deals done on CBLO Dealing System cannot be directly uploaded in to the proprietary system of the Member directly from the database. The .CSVs are provided to Members precisely for this purpose. The .CSVs saved in the Members a folder in local or common drive can be utilised by the Member to upload in to their proprietary system through a utility developed at Member end for converting the .CSVs in to formats compatible with the formats in the Members proprietary system.

25. Can a member view its limits i.e. Initial Margin and Borrow Limit on the CBLO Dealing System?
Yes. Members can view their Available Trading Limits for the day, i.e., Available Initial Margin and Available Borrowing Limit on the CBLO Dealing System, in the Check Limits screen under Basic Data Query. The member can also view his utilization after every trade and the updated status of his balance limit. Also, in case of intra-day deposits and withdrawals of collaterals the trading limits displayed in the screen are updated accordingly.

26.

When does a member get suspended on the CBLO Dealing system?

A member gets suspended on the CBLO Dealing system in automatically when the Initial Margin available for CBLO segment is insufficient to cover his traded positions. A member may also be suspended by Clearcorp / CCIL for any reason which in the opinion of Clearcorp / CCIL warrants deactivation.

27. What happens to a members outstanding orders in case of intra day deactivation due to limit exceeding?
On deactivation, all outstanding orders of that member automatically stand cancelled.

28. Can a Member who has breached his limits during trading deposit additional margin intra day to trade further?
Yes, a member can deposit additional margin intra-day so as to cover his breached limits and trade further. A member is automatically suspended on the CBLO Dealing System in case Initial Margin limit is breached. On deposit of additional collaterals intra day towards Initial Margin such that the utilization is within the Initial Margin limit, the member is automatically re-activated on the CBLO Dealing System.

29. Can a Member sell a CBLO in T+0 cycle which the member has bought in T+1 cycle the previous business day?
Yes. CBLO bought in T+1 settlement cycle in the previous business day can be sold in T+0 settlement cycle on the next business day.

30.

How does a member deposit securities? Can a member borrow against collateral deposited?

Members desirous of depositing securities are required to do so through e-notice facility, the link to which is provided on CCILs web site. The transfer of securities through Value Free Transfer module of NDS from the Members SGL Account to the CSGL Account maintained by CCIL for CBLO Segment followed immediately by notice of intent in the prescribed format in e notice is the process to be followed for deposit of securities for CBLO segment. In case of a CBLO Member not having an SGL account with RBI, such member need to advise their Custodian Bank with whom they maintain GILT account to transfer securities to CSGL account of CCIL. The e notice for such deposits shall be given by the CBLO member who does not maintain SGL account with RBI. However, such e notice shall be received through the Settlement Bank. Members can deposit securities with CCIL during the day up to close of Trading session . The Borrowing limits are updated instantaneously on deposit of eligible securities in CBLO segment by a member following the extant process including e notice and its confirmation at our end in e notice as to the receipt of such securities in our CSGL account for CBLO segment. The limits that would get updated for borrowing are based on the MTM values of the securities deposits and haircut imposed on such securities. (Note: Please refer to FAQs in the e-Notice section for further details.)

31.

Can one withdraw / substitute the securities that have been deposited as Collateral?

Yes. Members can withdraw the unencumbered portion of securities deposited and also substitute securities that have been deposited as collateral either intra-day or at EOD for next day value. (Note: Please refer to Collaterals and Margins section for further clarifications.)

32.

Can one withdraw encumbered securities?

No. Securities blocked against outstanding borrowing cannot be withdrawn. The Withdrawal Request for such securities will be rejected by CCIL. However, members may withdraw such securities after depositing other eligible securities for the equivalent value.

33. Is the title / ownership of the security transferred to lenders, as and when members borrow funds using the collaterals deposited by them?
The title / ownership of the securities remain with the borrowing members and the same are not transferred to lenders. However, the securities are blocked in the CSGL account to the extent of borrowing obligation completion of funds settlement.

34.

How can a member contribute to Initial Margin?

Collateral contribution in cash shall be reckoned as Initial Margin. Members desirous of depositing Initial margin (cash) need affect a remittance to CCIL RTGS account and also communicate intent of such transfer giving details through e notice. The request received through e notice shall be accepted / approved by CCIL in e notice on citing the funds in our RTGS account and on such approval / acceptance, the money transferred shall be reckoned as Initial Margin. (Please refer to FAQs under e-Notice section for further clarification) . Members settling through settlement bank can deposit amount in CCILs current account with settlement bank.

35.

How much Initial Margin is to be contributed by the members?

Members and Associate members are required to deposit a minimum of Rs.1 lakh towards Initial margin. The minimum Initial margin deposit has to be strictly in cash only. Over and above this the Members/Associate members are required to deposit initial margin in advance at the rate of 0.50% of their trade volume.

36.

Can a Member deposit securities towards Initial Margin requirement?

Yes. A CBLO member has to deposit a minimum cash of Rs.1lakh towards Initial Margin. Members may over and above the minimum cash, contribute eligible securities towards Borrowing Limit(BL) and the BL to the extent utilised will be reckoned as Initial Margin.

37.

Are members entitled to receive interest on the cash deposited towards Initial Margin?

Members are entitled to receive interest at quarterly rests (at the end of every quarter) on the maximum daily utilization over and above minimum Initial Margin (cash deposit) stipulated for the segment. The minimum cash deposit stipulated for the time being in force is Rs.1 lakh.

38.

What is Mark-to-Market Shortfall?

The eligible securities deposited as collateral with CCIL for availing limits for CBLO Dealing, are subjected to Mark-toMarket valuation intra day or end of day on a daily basis as part of the EOD processes. When the value of the underlying collateral declines on account of mark-to-market valuation such that it is insufficient to cover the amount borrowed by the member in the CBLO segment, the difference between mark to market values of such collaterals and the amount borrowed is construed as mark-to-market shortfall occurs.

39.

Where are the reports for CBLO segment made available?

All reports, both trading and settlement reports for CBLO segment are made available through the CCIL Report.

40.

Which Reports are made available to members by CCIL?

The CBLO reports made available to members in Report Server on daily basis are: a) Daily Transactions Report gives details of all the trades done by a Member for the day in both Auction and Normal Market; b) Obligation Report for CBLOs and Funds gives CBLO wise pay-in / pay-out obligation and funds pay-in / pay-out for each member; c) Settlement Report for CBLO and Funds; d) Account Balance Report giving CBLO and Borrowing Limit balances; e) Consolidated Funds obligation / settlement report; f)Buy Back Report Reports for exceptional events; g) Trade Loss Report; h) Order cancellation Report; in the event the Member has requested CCIL to cancel its orders. i) Intra-day Initial Margin Exceeding Report. In the event of CBLO and Funds shortage the following Reports are made available; j) CBLO Shortfall and Replenishment Report; k) CBLO Shortfall Penalty Report; l) CBLO Allocation Compensation Report; m) Fund Replenishment Report; n) CBLO Shortfall Penalty Report; o) Summary of Funds Settlement for CBLO & Securities segment.

1. 2. 3. 4. 5. 6. 7. 8. 9.

What is initial margin? How is Initial Margin computed? What is borrowing limit? How is borrowing limit computed? What is utilization of borrowing limit? How is hair-cut determined? Are all securities accepted as collateral for computation of borrowing limit? When can a security, deposited as collateral, be withdrawn by a member? Is a security, offered as collateral for borrowing in CBLO market, considered for SLR purpose?

1. What is initial margin? Initial margin constitutes the margin obligation required to be fulfilled by a Member in respect of its matched deals in CBLO segment. Members are to deposit initial margin in the form of cash, in advance, before putting up any bid or before accepting any offer. In the auction market, only lenders are required to provide Initial Margin whereas in the secondary market, all members are required to provide Initial Margin on their CBLO wise net trade positions.

2. How is Initial Margin computed? Initial margin is presently computed @ 0.50% of the face value of the concerned CBLOs. While arising at the net outstanding contracts for each CBLO, offset is allowed on FIFO basis and if there is any loss due to such offset, CCIL may, upon notification, treat such loss as Initial Margin before allowing such offset. The rate of

0.50% which is known by Margin Factor is presently uniform for CBLOs of all maturities. The rate can be changed by CCIL by using suitable notification and it can be different for CBLOs having different maturities or for separate class of members. 3. What is borrowing limit? Borrowing limit is a limit given to a member to enable it to borrow funds from CBLO market. 4. How is borrowing limit computed? The eligible securities deposited by a member as collateral towards allocation of borrowing limit in CBLO segment is subjected to a valuation exercise at the end of each business day. The valuation is carried out using CCILs mark-to-mark price for such securities. Aggregate value of securities contributed by a member, net of haircut, rounded downwards to the nearest rupee is set as permissible borrowing limit for such member. 5. What is utilization of borrowing limit? Borrowing in CBLO segment results in utilisation of borrowing limit. The utilised portion of the borrowing limit of a member at the end of a day would be equal to the aggregate face value of the outstanding CBLO borrowings in the account of such member. During the day, orders placed in the auction market are also treated as utilisation. Securities covering the face value of the outstanding CBLO borrowings are blocked in the members account as security for the borrowing. 6. How is hair-cut determined? The market value of a security, offered as collateral, may depreciate before realisation due to rise in interest rates. To take care of the possibility of such reduction in value, hair-cut is imposed by CCIL. As prices of all securities do not change to the same extent for an equal change in interest rate, hair-cut rate is security specific, based on Value at Risk for the security for a 5 day holding period, which is multiplied by a Multiplicant based on the securitys liquidity during the previous quarter. A security which is highly liquid will have a Multiplicant of 1, a semi-liquid security has a Multiplicant of 1.5 and an illiquid security has 2 as its Multiplicant.

7. Are all securities accepted as collateral for computation of borrowing limit? All Central Government securities and Treasury bills are accepted as collateral for borrowing limit. CCIL prescribes a list of such securities periodically that are eligible for contributions by members. Securities may be taken out of the list as those reach closer to maturity. 8. When can a security, deposited as collateral, be withdrawn by a member? Securities in excess of the required collateral for CBLO borrowings can be withdrawn anytime by a member after giving required notice as per the Regulations applicable for CBLO segment. 9. Is a security, offered as collateral for borrowing in CBLO market, considered for SLR purpose? As per clarification received from Reserve Bank of India, out of the total amount of securities lodged in the CSGL account with CCIL, only such portion of the security which is adequate to cover the borrowing of a member in CBLO segment (i.e. encumbered securities) would not be considered for SLR purposes. Remaining securities could be considered for SLR purposes. CCIL makes available a memberwise report, Status of collateral Deposits, as at the end of each day to clearly indicate the securities which are non-encumbered and hence, can be counted for SLR purposes.