In the notification of International Financial Services Centres Authority, published in the Gazette of India

## Policy Analysis Report: Corrigendum to International Financial Services Centres Authority Banking Regulations, 2020 **1. Executive Summary:** This report analyzes a corrigendum issued by the International Financial Services Centres Authority (IFSCA) concerning its Banking Regulations, 2020. The corrigendum, published on May 12, 2021, modifies Regulation 13 of the original regulations, specifically related to the functions of trading and clearing members in derivative segments. The amendment clarifies and broadens the scope of permissible activities for these members, allowing them to function as either trading members or clearing members, or both. The key finding is that the change intends to provide flexibility for financial institutions participating in the International Financial Services Centres (IFSC) by enabling them to engage in both trading and clearing activities in the derivative market. **2. Introduction:** This report aims to provide a comprehensive analysis of the corrigendum issued by the International Financial Services Centres Authority (IFSCA) to its Banking Regulations, 2020, focusing solely on the information provided within the given document. The analysis will cover the amendment's objective, background, key changes, target audience, implementation aspects, and expected outcomes. **3. Policy Overview:** * This report analyzes a corrigendum to the *International Financial Services Centres Authority Banking Regulations, 2020*. * **Core Objective (inferred):** The core objective of this amendment is to clarify and broaden the scope of permissible activities for trading and clearing members in the International Financial Services Centres (IFSC) concerning derivative segments. This aims to facilitate more efficient and comprehensive participation in the derivatives market. **4. Background and Rationale:** This is an amendment to existing regulations. The rationale behind this specific amendment appears to be to address potential ambiguity or limitations within Regulation 13 of the original IFSCA Banking Regulations, 2020. The original regulation, as inferred from the amendment, seemed to separate the functions of trading and clearing members, potentially requiring firms to choose one or the other. The amendment seeks to rectify this by explicitly allowing firms to function as *both* trading and clearing members. This suggests a need to streamline operations and reduce regulatory obstacles for financial institutions operating within the IFSC. **5. Key Provisions / Changes:** This section focuses specifically on the changes introduced by the amendment. * **Specific Part of Original Policy Changed:** Regulation 13 of the International Financial Services Centres Authority Banking Regulations, 2020. * **New Rule/Provision:** The amendment replaces the phrase "Function as a trading member for trading in interest rate or currency derivatives or as a professional clearing member for clearing and settlements in any derivative segment" with "Function as a trading member for trading in interest rate or currency derivatives *and/or* as a clearing member for clearing and settlements in any derivative segment." * **Difference/Effect of Change:** The original phrasing used the word "or," suggesting a mutually exclusive choice between functioning as a trading member *or* a clearing member. The amendment replaces "or" with "and/or". This allows a single entity to function as *both* a trading member *and* a clearing member. This provides greater flexibility and efficiency for financial institutions, allowing them to offer a more comprehensive range of services within the IFSC. **6. Target Audience and Stakeholders:** Based on the provided text, the directly affected stakeholders are: * Financial institutions operating within the International Financial Services Centres (IFSC). * Specifically, entities that are or intend to be trading members and/or clearing members for interest rate or currency derivatives. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The International Financial Services Centres Authority (IFSCA) is the responsible body for implementing and overseeing these regulations and amendments, as indicated by the notification. * **Timelines/Procedures:** The document does not specify immediate timelines or procedures related to the change. However, it can be inferred that existing and prospective trading and clearing members should update their operations and compliance frameworks to align with the amended regulation. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of this amendment is: * **Increased Flexibility:** Financial institutions operating in IFSC will have greater flexibility in their operations, as they can now simultaneously engage in both trading and clearing activities for derivatives. * **Operational Efficiency:** The elimination of the need to choose between trading and clearing memberships should improve operational efficiency. * **Increased Participation:** The amendment may encourage greater participation in the IFSC derivative market by reducing regulatory obstacles. * **Enhanced Market Depth and Liquidity:** By facilitating participation from a broader range of institutions, the amendment could contribute to increased market depth and liquidity in the derivative segment. **9. Conclusion:** The corrigendum to the IFSCA Banking Regulations, 2020, represents a targeted effort to refine the regulatory framework for trading and clearing members operating in the International Financial Services Centres (IFSC). By clarifying and expanding the scope of permissible activities for these members, the amendment is expected to enhance operational flexibility, increase participation, and promote the growth of the derivative market within the IFSC. This change underscores the IFSCA's commitment to fostering a conducive regulatory environment that supports the development of a thriving financial services ecosystem.

Key Entities Referenced