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What is the process of Novation and what are the advantages of settling trades through the CCIL ?

April 26, 2017advantages ccil novation process settling trades

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What is the process of Novation and what are the advantages of settling trades through the CCIL ?

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Novation is the process by which government securities transactions are settled through CCIL. This means that CCIL will act as a buyer to the seller of security and simultaneously will act as a seller to the buyer of the security. This will in effect remove the credit risk faced by members vis-à-vis their counterparties. Besides, CCIL provides the additional comfort of improved risk management practices through daily marking to market of collateral, maintenance of daily margins by members and through a Guarantee Fund.