Вы находитесь на странице: 1из 28

CBLO

DR.S.C.BIHARI

What is CBLO?
It is a money market instrument approved by RBI. It is a product developed by CCIL. CBLO is a discounted instrument available in electronic book entry form for the maturity period ranging from one day to ninety Days (can be made available up to one year as per RBI guidelines).

PURPOSE
It

aims to benefit three entities, particularly, who have been phased out of interbank call money market who have been given restricted participation in terms of ceiling on call borrowing and lending transactions who do not have access to the call money market

SERVICE PLATFORM
In order to enable the market participants to borrow and lend funds, CCIL provides the Dealing System through: - Indian Financial Network (INFINET), a closed user group to the Members of the Negotiated Dealing System (NDS) who maintain Current account with RBI. - Internet gateway for other entities who do not maintain Current account with RBI.

MECHANISM
It

is

money

market

instrument,

introduced in Jan-2003, backed by Gilts as collaterals


Creates

a charge on the Collaterals

deposited by the Borrower with CCIL for the purpose

MECHANISM

Creates an Obligation on the borrower to repay the money borrowed interest on a specified future date along with

A Right and Authority to the lender to receive money lent along with interest on a specified future with an option/privilege to transfer the authority to another person for value received

CBLO explained

An obligation by the borrower to return the money borrowed, at a specified future date; An authority to the lender to receive money lent, at a specified future date with an option/privilege to transfer the authority to another person for value received; An underlying charge on securities held in custody (with CCIL) for the amount borrowed/lent.

Membership

Membership is granted based on their NDS (Negotiated Dealing System) membership CBLO Members (who are also NDS members) CBLO Associate Members (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.,

PLAYERS
Banks, financial institutions, primary dealers, mutual funds and co-operative banks, who are members of NDS, are allowed to participate in CBLO transactions. Non-NDS members like corporates, cooperative banks, NBFCs, Pension/Provident Funds, Trusts etc. are allowed to participate by obtaining Associate Membership to CBLO Segment.

OPERATIONAL FEATURES
Follows an anonymous, order-driven and online trading system On the lenders side main participants are mutual funds, insurance companies. Major borrowers are nationalized banks, PDs and non-financial companies

The Members are required to open Constituent Subsidiary General Ledger (CSGL) Account with CCIL for depositing securities Associate Members are required to open a current account with a Settlement Bank designated by CCIL for settlements of funds

OPERATIONAL FEATURES
CCLIL fixes borrowing limits CCIL becomes counterparty to each CBLO transaction

Eligible

securities

are

Central

Government securities including Treasury Bills as specified by CCIL from time to time

Borrowing Limit and Initial Margin


Borrowing

limit is determined based on mark to market values and hair-cuts on securities deposited Members are required to deposit initial margin in the form of Cash (minimum Rs.1 lac) only and over and above Government Securities can be deposited Initial margin is computed at the rate of 0.50% on the total amount borrowed/lent by the members.

Borrowing Limit and Initial Margin


Intraday

enhancement of

BL/IL is

permitted by collaterals/ cash


Intraday

depositing additional

withdraw of securities are provided they are

permitted

unencumbered (for cash one day prior notice is required)

Nature, Form and Period


CBLO

is issued at par for a particular maturity It is traded at a discount to par value , i.e., discounted instrument Available in electronic book entry form For the maturity period ranging from 1 day to 90 days (It can be issued for a maximum tenor of 1 year as per RBI guidelines)

CHARACTERISTICS

LIQUIDITY ACCEPTABILITY ACCESSIBILITY AVAILABILITY OF DIFFERENT TENORS CREDIT RISK MITIGATION

Minimum and Multiple order 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

CBLO Dealing

CBLO Dealing System is maintained by Clearcorp Dealing Systems (India) Ltd (CCDS), a fully owned subsidiary of CCIL

The Dealing System is provided through Indian Financial Network (INFINET) for those who maintain Current account with RBI (NDS Members) and through Internet for other entities who do not maintain Current account with RBI (Non NDS Members)

CBLO is issued in two markets


Auction

Market: only to NDS Members for overnight borrowing and settlement on T+0 basis
Members submit their borrowing requests clearly indicating the amount, maturity and the cap rate before commencement of the auction session Currently the permissible caps are (linked to): (a)CCBOR (CCIL Collateralised Benchmark Offer Rate) (b)(b) CCBOR + 10 bps; (c) (c) CCBOR 10 bps; (d)(d) No cap specified

Normal Market: to both CBLO members and Associate members Members deposit cash and /or securities prior to starting Dealing Members can place their borrow/ lending orders till the closure of market hours for both T+0 and T+1 settlement type Orders get matched in CBLO Normal market on Yield Time priority among the orders present at that point in time

In a CBLO deal there are two benchmark ratesBid rate: CCIL Collateralized Benchmark Rate (CCBID) Offer rate: CCIL Collateralised Benchmark Offer Rate (CCBOR) The rates to be arrived and disseminated at two times in a day on the basis of orders received Weighted average rate would be the cut off rate for both If the difference between weighted average BID and Offer rates are more than 100 bps weighted average of traded rate would be the rate for both

CCIL Benchmark Reference Rates


Date Time CCBOR CCBOR () CCBID CCBID ()

01/12/2010

1st Fixing

10:00 AM 6.2331

0.0096

6.2296

0.0110

01/12/2010

2nd Fixing

01:00 PM 6.2317

0.0107

6.2301

0.0118

30/11/2010

1st Fixing

10:00 AM 6.2543

0.0075

6.2505

0.0055

30/11/2010

2nd Fixing

01:00 PM 6.2427

0.0143

6.2425

0.0157

Source: CCIL

Trading
CBLO

is a discounted instrument

traded on Yield Time priority


The

instrument which are available

for trading are those with maturity of next seven business days and three month end dates

Clearing and Settlement


CBLO

operates on a Straight through

Process (STP)
The

trades received are novated and

netted for settlement


Current Account with RBI Current Account with Settlement Bank

Default handling
Funds

Shortage: when members fail to

meet funds obligation on the day of settlement


CBLO

Shortage: when the members CBLO without having

borrow/sell

sufficient borrowing limit or concerned CBLO in their account

Transaction Charges (Clear Corp):


SL.NO. PARTICULARS 1 AUCTION MARKET CHARGES Rs.5/-per crore of face value per trade per member subject to min 5/-,max Rs.500/-per trade NORMAL Rs.5/-per crore of MARKET(TO face value per trade BE CHARGED per member subject ON THE VALUE to min 5/-,max DATE OF EACH Rs.500/-per trade TRADE

B. Settlement Charges (CCIL):


SL.NO. 1 PARTICULARS AUCTION MARKET CHARGES Rs.10/-per crore of face value per trade per member subject to min 10/-,max Rs.1000/-per trade plus S/T a/a to be charged at the time of initial borrowing Rs.10/-per crore of face value per trade per member subject to min 10/-,max Rs.1000/-per trade

NORMAL MARKET

Default Charges
SL.NO. PARTICULARS CHARGES 1 Delayed Deposit of Margin Default 5 basis points per day on the amount of default till the shortfall is met 5 basis points per day on the amount of shortfall/default till the shortfall/default is met of which 3 basis points will be paid to the nondefaulting member on the shortfall, min 100/-

ADVANTAGES

Can be traded in secondary market till maturit y in the dealing platform provided by CCIL. Settlement of CBLO transactions fully guaranteed by CCIL. CBLO in electronic DEMAT form not subjected to stamp duty. Traded at Discount to Face value. CBLO transactions do not attract TDS, as the difference between face value/sale price and cost price is not in the nature of interest as per CBDT clarification.