SEBI allows clearing houses to move currency core SGF to equity derivatives

SEBI authorises transfer of core SGF from currency to equity derivatives
| Photo Credit:
FRANCIS MASCARENHAS

After a significant drop in exchange traded currency trading volumes, the Securities and Exchange Board of India (SEBI) has authorised clearing corporations to carry out a one-off transfer of their core settlement guarantee funds (SGF) from the currency derivatives side over to equity derivatives.

This transfer has helped both clearing houses — Indian Clearing Corporation (ICCL) and NSE Clearing — to shore up their equity derivatives segment’s safety net by transferring funds from the underperforming currency segment.

Core SGF is a financial buffer maintained by clearing corporations to ensure the settlement of trades even if a clearing broker defaults on obligations. Core SGF is calculated on the basis of the six-month peak margin of top five clearing members and also includes amounts of penalty and interest earned.

The move follows petitions made by clearing houses earlier this year citing liquidity issues in their currency SGFs following a directive by the Reserve Bank of India (RBI) issued in March.

The average daily turnover for currency futures and options on the National Stock Exchange (NSE) has been down over 95 per cent since March 2024 after RBI tightened rules requiring users to establish the existence of underlying exposure above $100 million equivalent across all currency pairs involving rupees, put together, and combined across stock exchanges.

One-time transfers

Responding to queries, BSE’s clearing arm ICCL said the amount transferred from core SGF of currency derivatives to equity derivatives was ₹444 crore. As of May 2025, the current balance of core SGF in the equity derivatives segment is ₹883.22 crore and that of currency derivatives segment is ₹13.89 crore. ICCL reversed a provision of ₹147 crore made in the December quarter for core SGF in the March quarter after the markets regulator approved the one time transfer.

NSE Clearing is also expected to have already made use of this on-time relief to cover the shortfall of ₹177 crore in its liquidity reported last quarter. According to NSE’s financials, the exchange’s clearing arm has currency segment core SGF of around ₹166 crore and equity derivatives core SGF of around ₹11,400 crore as of May 2025.

SEBI and NSE Clearing did not reply to emailed queries.

Core SGF is also called minimum risk capital, with complex formulas prescribed by SEBI for determining the minimum required corpus of Core SGF for the cash market, futures and options, currency derivatives segments and commodity derivatives segment.

Published on June 10, 2025