A central counterparty clearing house (CCP) is a corporate entity that reduces counterparty and default risk for traders.
It acts as the counterparty to the buyer and the seller and guarantees the terms of a trade even if one party defaults on the agreement. It is able to discharge its function as it ollects money from each buyer and seller in advance. This helps in faster transactions.
The KCC, which is in charge of carrying out clearing, settlement, and depository services at Boursa Kuwait, will make use of ‘BaNCS for Market Infrastructure’ to provide the central counter party transactions as shifts from the earlier gross settlement model.
‘BaNCS for Market Infrastructure’ is a transaction management solution, which includes clearing, trade and position management, risk management, collateral management, fails management, and securities lending and borrowing.
TCS had earlier implemented a modern and robust central securities depository and registrar solution at KCC.
KCC also provides registrar and trustee services to companies and investment funds, and performs local and regional custody services for both local and foreign investors.
The move is positive for the Indian IT company as it will bolster its chances of winning more and more clients in the Middle East, as well as in the capital markets space.
“The Kuwaiti financial market is undergoing transformation, which includes transitioning from a gross settlement model to a CCP-based settlement model. This is a pioneering initiative in the Middle East region,” said TCS.
The creation of a CCP is aimed at increasing liquidity, reducing risk, promoting global investments and participation, and facilitating the introduction of new products to the Kuwaiti market.
As part of the deal, TCS will provide KCC with a “proven, unified clearing solution” for the cash and derivatives markets, the Tata Group company said.
R Vivekanand, Vice-President and Co-Head, TCS Financial Solutions said the company’s “strong presence” in Kuwait across multiple financial institutions will help it carry out the mandate.