CCIL CLEARING & SETTLEMENT BUSINESS CONTINUITY RISK MANAGEMENT

Clearing & Settlement Engine

CCIL is providing institutional infrastructure to
clearing and settlement of transactions by banks and
FIs. Banking Frontiers Editor Manoj Agrawal looks
itno into the corporation’s mission critical systems
and activities. A report:
trading systems namely, FX-CLEAR in the forex, Collaterilized
Borrowing and Lending Obligation, or CBLO, in the money market
and also NDS-OM, NDS-CALL, NDS-AUCTION on behalf of the RBI.
CCIL has set membership norms for each segment in consultation
with the RBI. Most of the banks and FIs are members of CCIL

C
products. For CBLO, large corporates and insurance companies
learing Corporation of India Ltd (CCIL) was set up in 2001 are also members and they deal in the system over internet.
at the initiative of the Reserve Bank of India with the aim CBLO is an innovative product, which is India’s first success
of providing an institutional infrastructure for the clearing in the use of anonymous electronic trading in the money/bond
and settlement of transactions in government securities, money market. CCIL settles cross-currency deals through the CLS Bank
market instruments and foreign exchange products. The objective by aggregating trades reported by all member-banks. CCIL also
was to bring in efficiency to the transaction settlement process, acts as the settlement agency for the National Financial Switch
to insulate the financial system from shocks emanating from (NFS). It has developed a yield curve to price all the non-traded
the operations-related issues and to undertake securities using the information of traded
activities that would help in broadening and bonds. The prices of all bonds estimated by the
deepening the debt, money and forex markets in said yield curve are used by Lehman Brothers,
the country. Many of the country’s leading banks New York, for its India Index. CCIL has taken
and financial institutions own stakes in CCIL with initiatives to develop and disseminate bond
the State Bank of India being the lead promoter. and T-bills indices and benchmark reference
CCIL has adopted the Core Principles set by the rates like CCBOR and MIBOR for the benefit of
Committee of Payment and Settlement Systems the market participants. It regularly conducts
(CPSS) of Bank for International Settlements training for the market participants on various
(BIS) and International Organization of Securities treasury related topics. It has elaborate risk
Bala Jothi management processes in place, including
Commissions (IOSCO) that prescribe the design
and operation of payment systems the world over. shortage handling, exposure monitoring,
The business model is based on a strong information technology initial margins and settlement guarantee fund. For all practical
infrastructure. CCIL has been able to provide comfort not only to purposes, the systems have reduced and eased the treasury back-
the market participants by taking out the settlement risk from office and mid-office functions in the banks.
the system through an innovative process but has also introduced
core trading and negotiating systems to facilitate shift from the MISSION CRITICAL
voice-driven market to electronic mode with RBI support. At CCIL, the transactions are less in volumes but very high in
Today, CCIL is an organization which provides an umbrella for values. “Transactions worth more than Rs 1 trillion are processed
settlement of multiple products. It operates on the concept daily. Since the number of daily transactions is in tens of
of multilateral netting by a central counter-party for a transaction thousands, the availability of systems is extremely critical for the
in the OTC as well as anonymous order-driven markets. Multilateral members,” says Bala Jothi, senior vice-president, IT, CCIL. The
netting has helped in reducing the counter-party risk to a very normal trading window is from 9 am to 4 pm for most of the
large extent. Funds settlements of all markets that CCIL serves products. The transactions move from the trading system to the
have migrated to the multilateral netting arrangement, whereby settlement system in STP mode. In parallel, there is a surveillance
individual members’ obligations to pay or receive funds arising system that monitors and detects abnormal market behaviors. The
out of every single transaction are aggregated and offset into risk management system constantly monitor the exposure limits.
a single net fund obligation.
IT SET-UP
PRODUCTS AND SERVICES CCIL’s primary datacenter is located at Lower Parel in Mumbai.
CCIL started off with the settlement system first and introduced It is equipped with HP Superdome Unix servers on which all
various trading systems subsequently. It is supported by its fully- production applications run. These servers are configured in
owned subsidiary, Clearcorp Dealing Systems Ltd in all the five cluster mode to ensure high-availability. CCIL has also the largest

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CCIL CLEARING & SETTLEMENT BUSINESS
installation of Unix server virtualization using HP VPAR software
to enable independent environment for each of its applications.
In addition, there are HP N-Class Unix servers for software
development, testing and mock runs. All the members connect to
CCIL servers over the INFINET, the network owned and managed by
the Institute for Development and Research in Banking Technology,
Hyderabad (IDRBT). The software development and maintenance
of all business critical applications have been outsourced to TCS.
An in-house 40-strong IT team develops/maintains software for
back-office functions and reporting requirements and is directly
engaged in day-to-day management of the IT infrastructure
including system / database / network / security administration
and the technical help-desk. There are more than 10 critical
applications, which include trading systems, settlement systems,
funds & accounting system, risk management system, web server
for CBLO and real time market data dissemination. All important
strategic IT decisions are vetted by a technical advisory committee
comprising experts from the field and headed by Dr. N.L Sarda,
professor, IIT, Mumbai.
BUSINESS CONTINUITY
CCIL is one of the few organizations in the country that has
implemented a comprehensive business continuity plan from day
one. CCIL has set up its disaster recovery site at Hyderabad in
the IDRBT campus. The DR site is equipped with HP Unix servers
to replicate the databases from primary site. Also, there is a
local Alternative User Location (AUL) set up at Andheri, Mumbai.
AUL has sufficient terminals for the end-users to administer the
applications from locally in the event of any disaster at primary
site. All production databases are replicated from primary to DR
site in asynchronous mode using Oracle’s Dataguard. CCIL is also
in the process of implementing SAN-based synchronous replication
of data at its local AUL to ensure the lowest RPO.
APPLICATION ARCHITECTURE
All CCIL applications are developed in client-server architecture
as the best performance in terms of response time and throughput
is critical. HP Superdome Unix servers are used as database and
application servers. Each member has a gateway server running
on Windows and multiple dealers of a member can connect to
the CCIL host via the server. The application uses IBM Websphere
MQ Series as messaging layer for seamless connectivity between
the host and member-server. The application software has three
distinct components, namely, host, member-server and dealer.
MQ is configured with persistent queues to ensure assured delivery
of messages. As CCIL hosts several mission critical systems, the
administration of the systems is extremely critical. It has chosen
CA Unicenter to proactively monitor all the components of the
system like OS, database, application and network. “While other
CONTINUITY RISK MANAGEMENT
similar products were evaluated for the purpose, Unicenter
met our technical requirements and was the best fit for our
environment. It was implemented by Wipro,” says Bala.
OUTSOURCED SOFTWARE DEVELOPMENT
The software development and maintenance of all business
critical applications has been outsourced to TCS. CCIL business
teams give the requirements to TCS and after the software
development is complete, the same is tested thoroughly in-house
before it is accepted for release to production. All the IT services
in CCIL are process driven rather than people driven and they
are documented through appropriate policies and procedures.
For example, as part of software release management, as far as
possible, requirements are pooled and a new version is released
once a quarter. The settlement system built by CCIL with the help
of TCS is unique and a complex piece of software. CCIL keeps
reviewing its business strategy and based on the same, it revisits
the IT strategy and architecture regularly. “In some cases we
consolidate and in other cases we modularize or distribute the
applications. To support the increasing demand for computing we
are currently in the process of consolidating about 40 Intel servers
by implementing VMware’s virtualization solution,” says Bala.
INFO SECURITY
The information system (IS) security is most critical for CCIL
and its operations. CCIL has a dedicated team to manage the IS
security headed by a full time Chief Information Security Officer
(CISO), who is supported by Departmental Information Security
Officers (DISOs). CCIL was probably one of the first to achieve ISO
27001 certification for its entire operations through Det Norske
Veritas (DNV) in the financial sector in July 2006. Says Bala: “We
use various IT management tools like CA Unicenter, MS ADS/SMS,
Adventnet Service Desk+, Checkpoint Firewall, IDS, IPS, Symantec
antivirus, etc to monitor and enforce all policies and procedures.
Enforcing security policies manually is not practical. With these
automated tools, these functions are handled by a small team of
3 to 4 people.”
CCIL was also assessed for its risk management practices by
experts from European Central Bank (ECB), Bank of France and a
team of IIM Bangalore headed by Prof. P.G. Apte, who found the
risk management systems robust and generally in compliance with
international standards for Central Counter Parties (CCPs).
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