Daily Current Affairs for UPSC CSE
Topics Covered
- Market Infrastructure Institutions
- Co-location
- Swift Payment
- Ayushman Bharat Digital Mission
- Facts for Prelims
1 . Market Infrastructure Institutions
Context : Markets regulator SEBI (Securities and Exchange Board of India) passed a 190-page order sanctioning the NSE, Ms. Ramkrishna, her predecessor Ravi Narain and a former Group Operating Officer Anand Subramanian, whose appointment by Ms. Ramkrishna was the primary matter under investigation, and levied financial penalties on each of them. In setting the context for its order, SEBI noted that the NSE was a systemically important market infrastructure institution (MII).
What are MIIs?
- Stock exchanges, depositories and clearing houses are all Market Infrastructure Institutions and constitute a key part of the nation’s vital economic infrastructure.
- A panel set up under the chairmanship of former RBI Governor Bimal Jalan — to examine issues arising from the ownership and governance of MIIs — in its 2010 report said: “The term ‘infrastructure’ would mean the basic, underlying framework or features of a system; and the term ‘market infrastructure’ denotes such fundamental facilities and systems serving this market.
- The primary purpose of securities /capital market is to enable allocation/reallocation of capital/financial resources.” Such movement, it pointed out, helped optimal use of money in the economy and fostered economic development. Well-functioning MIIs, constitute “the nucleus of (the) capital allocation system”, are indispensable for economic growth and have a net positive effect on society like any other infrastructure institution, the panel noted.
Why are they considered to be systemically important?
- That MIIs are systemically important in India is clear from the phenomenal growth of these institutions in terms of market capitalisation of listed companies, capital raised and the number of investor accounts with brokers and depositories and the value of assets held in the depositories’ account, as highlighted by the Jalan committee.
- Unlike typical financial institutions, the number of stock exchanges, depositories and clearing corporations in an economy is limited due to the nature of its business, although they cater to the entire marketplace, the panel pointed out. “Any failure of such an MII could lead to even bigger cataclysmic collapses that may result in an overall economic downfall that could potentially extend beyond the boundaries of the securities market and the country,” it observed.
Why are governance norms critical in the regulation of MIIs?
- Given the potential for a domino effect that a failure of an MII could have on the wider market and economy, governance and oversight are absolutely critical and need to be of the highest standards. Take the example of a technical glitch at the NSE early last year. Investors were not able to trade for about four hours. It prompted the Finance Minister to later state that the loss for the country had been ‘immense’ due to the delay in resumption of trading on the platform and that switching over to another platform should have been seamless.
- Markets regulator SEBI later set out norms stipulating timelines within which an exchange has to take action if its technology fails, including rules for switchover to backup servers as part of the disaster recovery in an institution that enables transactions running into thousands of crores of rupees daily. For context, the average daily turnover at the NSE in January this year was ₹64,178 crore.
What are the specific institutions in India that qualify as MIIs?
- Among stock exchanges, the SEBI lists seven, including the BSE, the NSE, the Multi Commodity Exchange of India and the Metropolitan Stock Exchange of India. There are two depositories — charged with the safekeeping of securities and enabling their trading and transfer — that are tagged MIIs: the Central Depository Services Ltd. and the National Securities Depository Ltd.
- The regulator also lists seven clearing houses including the Multi Commodity Exchange Clearing Corporation. Clearing houses, for their part, help validate and finalise securities trades and ensure that both buyers and sellers honour their obligations.
2 . Co-Location
Context : The issue of co-location has come into the limelight once again in the wake of the latest order by the markets regulator sanctioning former National Stock Exchange (NSE) MD and CEO Chitra Ramkrishna over decisions taken by her under the alleged influence of a mysterious ‘yogi’. In its February 11 order, the Securities and Exchange Board of India (SEBI) had observed that the fact of Ms. Ramkrishna having shared confidential internal NSE information with an unknown person had come to light during the regulator’s probe of the co-location matter. SEBI had passed its first order after adjudicating the co-location case in April 2019, when it had fined the NSE a sum of ₹625 crore. The regulator had also at the time banned OPG Securities and its three directors from the securities market for five years and imposed a fine of about ₹15 crore.
What is co-location all about?
- In 2009, the NSE started to offer co-location services to members of the exchange.
- Co-location allows a member to set up his server in a specifically earmarked data centre within the NSE’s exchange premises for a certain price. And even though this data centre is located in a different wing from the exchange’s trading systems, the relative proximity allows members wishing to gain access to the entirety of buy and sell orders sent to the exchange by market participants, or tick-by-tick data, a headstart of a few microseconds or nanoseconds.
- However, these brokers technically will only be able to carry out automated trading using algorithms since the speed and volume of data arriving is too high to process manually. These so-called ‘high-frequency’ traders also often analyse the data in its entirety in order to refine their trading strategies, which is then incorporated into the algorithms that execute the automated trades.
- Other investors including retail participants, on the other hand, view a snapshot of market information that is periodically broadcast to them by the NSE on their broker platforms.
Is there anything illegal about co-location?
- Co-location per se is not illegal. Stock exchanges across the world allow the practice to flourish as a paid service. The SEBI, in fact, had allowed exchanges to offer co-location in 2008. So, the NSE co-location case has to do with something else.
- A whistleblower in 2015 alleged that some exchange members were able to manipulate NSE’s co-location services to their own benefit with the support of certain officials in NSE’s IT department. It should be noted that initially NSE disseminated order data to users of its co-location service through the TCP-IP or Internet Protocol technology that as a technology prioritises first comers. It is said that under this older technology members who logged into NSE’s servers first and into servers with the least load were able to access data coming from the exchange before others. Some members also attempted to tap into NSE’s backup server to bypass competition and are said to have employed various other tactics aimed at crowding out other members.
- SEBI, however, has not yet been able to establish that the NSE colluded in such manipulation. It has only penalised the exchange for failing to prevent the misuse of its co-location service. NSE also made changes to the way it disseminated data to users of its co-location services. In 2014, it introduced Multicast Protocol transmission under which data from the exchange was multicast and the members subscribed to a specified address to receive the tick-by-tick data.This ensures that all members availing the co-location facility receive the data streamed by the exchange on a service at the specified address.
Do co-location services give an unfair advantage to some?
- The issue of co-location has caused many to question the fairness of today’s market infrastructure.
- Supporters of co-location services argue that it allows quicker dissemination of market data and improves market liquidity.
- They also state that the service is available to anyone who is willing to pay the appropriate fee. It must also be noted that the other connectivity options to access NSE trading data, including the V-SAT and leased line, too are based on a fee.
- Critics of co-location, however, believe that it offers preferential access to certain market participants at the cost of others.
- This, they argue, goes against the fundamental purpose of exchanges, which is to ensure that securities are sold to the highest bidders among all market participants.
- In short, they contend that market efficiency is more important than speed. Some critics have even argued that exchanges should regulate the pace of transmission of order data in such a way that all market participants receive the data at the same time.
3 . Society for Worldwide Interbank Financial Telecommunication (SWIFT)
Context : The US and European Union (EU) have decided to partially exercise the nuclear-weapon option as far as economic sanctions are concerned: cutting off a number of Russian banks from the main international payment gateway, SWIFT. The assets of Russia’s central bank are also expected to be frozen, constraining Moscow’s ability to access its overseas reserves.
What is SWIFT?
- The SWIFT system stands for the Society for Worldwide Interbank Financial Telecommunication and is a secure platform for financial institutions to exchange information about global monetary transactions such as money transfers.
- While SWIFT does not actually move money, it operates as a middleman to verify information of transactions by providing secure financial messaging services to more than 11,000 banks in over 200 countries.
- Each participant on the platform is assigned a unique eight-digit SWIFT code or a bank identification code (BIC). If a person, say, in New York with a Citibank account, wants to send money to someone with an HSBC account in London, the payee would have to submit to his bank, the London-based beneficiary’s account number along with the eight-digit SWIFT code of the latter’s bank. Citi would then send a SWIFT message to HSBC. Once that is received and approved, the money would be credited to the required account.
- Based in Belgium, it is overseen by the central banks from eleven industrial countries: Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States, besides Belgium.
What happens if one is excluded from SWIFT?
- If a country is excluded from the most participatory financial facilitating platform, its foreign funding would take a hit, making it entirely reliant on domestic investors. This is particularly troublesome when institutional investors are constantly seeking new markets in newer territories.
- An alternative system would be cumbersome to build and even more difficult to integrate with an already expansive system. SWIFT, first used in 1973, went live in 1977 with 518 institutions from 22 countries, its website states. SWIFT itself had replaced the much slower and far less dynamic Telex.
Are any countries excluded from SWIFT?
- Certain Iranian banks were ousted from the system in 2018 despite resistance from several countries in Europe. “This step, while regrettable, was taken in the interest of the stability and integrity of the wider global financial system, and based on an assessment of the economic situation,” SWIFT states on its website.
How is the organisation governed?
- SWIFT claims to be neutral. Its shareholders, consisting of 3,500 firms across the globe, elect the 25-member board, which is responsible for oversight and management of the company. It is regulated by G-10 central banks of Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, the United Kingdom, the United States, Switzerland, and Sweden, alongside the European Central Bank. Its lead overseer is the National Bank of Belgium.
- The SWIFT oversight forum was established in 2012.
- The G-10 participants were joined by the central banks of India, Australia, Russia, South Korea, Saudi Arabia, Singapore, South Africa, the Republic of Turkey, and the People’s Republic of China.
- In 2021, the SWIFT financial messaging platform had recorded an average of 42 million FIN messages per day, as per the data on its website.
- The full-year figure was an 11.4% growth on a year-over-year basis.
- Europe, West Asia, and Africa, combined sent approximately 4.66 billion messages.
- The Americas and the United Kingdom stood second with 4.42 billion interactions, with the Asia Pacific on third with an approximate 1.50 billion messages
What does the move aim to achieve?
- Excluding Russian banks from the SWIFT platform is expected to hit the country’s economy hard — and in the words of the White House, it will make the country rely on “the telephone or a fax machine” to make payments.
- Decision to paralyse the assets of Russia’s central bank would stop the Kremlin from “using its war chest”, referring to its forex reserves.
- Moscow has been building up a cushion of foreign currency in the wake of the previous round of sanctions in 2014, with reserves touching a record high of $630 billion in January 2022. The new measures will significantly decrease the reserves available to the country’s central bank, according to experts.
- While workarounds to SWIFT have been tried, none have proven to be effective. During the last seven years, Russia, too, has worked on alternatives, including the SPFS (System for Transfer of Financial Messages) — an equivalent of the SWIFT financial transfer system developed by the Central Bank of Russia. The Russians are reported to be collaborating with the Chinese on a possible venture which will be a potential challenger to SWIFT.
- It needs to be seen if Moscow can leverage this platform to some extent to get around the partial ban, which could soon be escalated to a complete one.
Impact
- The intention of the moves is to “further isolate Russia from the international financial system”, a joint statement stated.Russian Invasion of Ukraine
- These joint sanctions are the harshest measures against Moscow since its forces went into Ukraine and are expected to badly hit a country that is heavily reliant on the SWIFT platform for its key natural resources trade, especially the payments for its oil and gas exports. Cutting off a country from SWIFT in the financial world is equivalent to restricting Internet access of a nation.
- Prior to this, only one country had been cut off from SWIFT — Iran. It resulted in it losing a third of its foreign trade. The move against Russia is only partly implemented for now, with only some Russian banks being covered. The option of expanding it further to a pan-country ban is something that the US and its allies are holding back as a further escalatory move.
4 . Ayushman Bharat Digital Mission
Context : The Union Cabinet under the chairmanship of Prime Minister Narendra Modi has approved the national roll-out of Ayushman Bharat Digital Mission (ABDM) with a budget of Rs.1,600 crore for five years.
Background
- Based on the foundations laid down in the form of Jan Dhan, Aadhaar and Mobile (JAM) trinity and other digital initiatives of the government, Ayushman Bharat Digital Mission (ABDM) is creating a seamless online platform through the provision of a wide-range of data, information and infrastructure services, duly leveraging open, interoperable, standards-based digital systems while ensuring the security, confidentiality and privacy of health-related personal information.
About Ayushman Bharat Digital Mission
- The Ayushman Bharat Digital Mission (ABDM) aims to develop the backbone necessary to support the integrated digital health infrastructure of the country. It will bridge the existing gap amongst different stakeholders of Healthcare ecosystem through digital highways.
- Under the ABDM, citizens will be able to create their ABHA (Ayushman Bharat Health Account) numbers, to which their digital health records can be linked.
- This will enable creation of longitudinal health records for individuals across various healthcare providers, and improve clinical decision making by healthcare providers.
- The mission will improve equitable access to quality healthcare by encouraging use of technologies such as telemedicine and enabling national portability of health services.
- The pilot of ABDM was completed in the six Union Territories of Ladakh, Chandigarh, Dadra & Nagar Haveli and Daman & Diu, Puducherry, Andaman and Nicobar Islands and Lakshadweep with successful demonstration of technology platform developed by the NHA.
- Not only will ABDM facilitate evidence-based decision making for effective public health interventions, but it will also catalyse innovation and generate employment across the healthcare ecosystem.
5 . Facts for Prelims
Munich Security Conference
- Ewald Heinrich von Kleist, an anti-Nazi who plotted but failed in assassinating Hitler during the Second World War, is the founder of the Munich Security Conference
- MSC began as an annual meeting between West Germany and western European partner nations and the U.S. and Canada in 1962
- The primary objective of the MSC was to make sense of the international affairs in an age when weapons of mass destruction had become part of the game
- Over its sixty years of existence, the MSC would address the threats like terrorism, religious fanaticism, cyber warfare, electronic intelligence and emerge as the ultimate platform for policy makers to exchange ideas in a friendly atmosphere.
- MSC is often remembered as the venue where President Putin made his famous 2007 speech when he elaborated on the post-Cold War Russian security concerns and publicly opposed the expanding footprint of North Atlantic Treaty Organisation (NATO) and placing of nuclear-tipped missiles in eastern Europe. The speech is considered a classical description of Russian concerns about the new generation of threats that worries Moscow. The MSC most recently was also in news for providing a platform to the world leaders before the invasion of Ukraine was ordered by President Putin. It was timely and a landmark event as it’s after seventy years that a war is taking place in Europe — a danger that MSC was created to avert.
Automatic route FDI
- Foreign investment is freely permitted in almost all sectors. Foreign Direct Investments (FDI) can be made under two routes—Automatic Route and Government Route.
- Under the Automatic Route, the foreign investor or the Indian company does not require any approval from RBI or Government of India for the investment.
- Under the Government Route, prior approval of the Government of India, Ministry of Finance, Foreign Investment Promotion Board (FIPB) is required.
Durand Line
- The Durand Line forms the Afghanistan–Pakistan border, a 2,670-kilometre international land border between the countries of Afghanistan and Pakistan in South Asia. The western end runs to the border with Iran and the eastern end to the border with China
Bhakrbeas management board
- As per the Indus Water Treaty, 1960 signed between India and Pakistan, the waters of three eastern rivers namely the Sutlej, the Beas and the Ravi were allotted to India for exclusive use. A Master Plan was drawn to harness the potential of these rivers for providing assured irrigation, power generation and flood control. Bhakra and Beas Projects form major part of the plan, and were established as a joint-venture of the erstwhile states of Punjab and Rajasthan.
- On Reorganisation of the erstwhile state of Punjab on 1st November, 1966, Bhakra Management Board (BMB) was constituted under section 79 of the Punjab Reorganisation Act, 1966. The administration, maintenance and operation of Bhakra Nangal Project were handed over to Bhakra Management Board w.e.f. 1st October 1967.
- The Beas Project Works, on completion, were transferred by Government of India from Beas Construction Board (BCB) to Bhakra Management Board as per the provisions of Section 80 of the Punjab Reorganisation Act, 1966. Pursuant to this Bhakra Management Board was renamed as Bhakra Beas Management Board (BBMB) w.e.f. 15th May 1976. Since then, the Bhakra Beas Management Board is dedicated to the service of nation and is engaged in regulation of the supply of Water & Power from Bhakra Nangal and Beas Projects to the states of Punjab, Haryana, Rajasthan, Himachal Pardesh, Delhi and Chandigarh.
Kuno Palpur National Park
- Kuno is a national park in Madhya Pradesh, India. Established in 1981 as a wildlife sanctuary with an area of 344.686 km² in the Sheopur and Morena districts, it was also known as Kuno-Palpur and Palpur-Kuno Wildlife Sanctuary. In 2018, it was given the status of a national park