Dated: 26th May
2005
Sub:
Comprehensive Risk Management Framework for the Cash Market
Further to the Notice dated 25th May 2005 of the Exchange on
the above subject, members are hereby informed that the computation of VaR
Margin in respect of national securities shall be modified as under. This is as per directions of SEBI vide their
letter No. MRD/SE/SK/4121/2005, dated 25th May 2005.
National
securities ie., securities under Group I category of NSE/BSE which are traded
at this Exchange shall be categorized as Less Liquid Securities (Group II) and
VaR Margin applicable for that category as per SEBI Circular No.
MRD/DoP/SE/Cir-07/2005, dated 23rd February 2005 shall be computed
on such securities.
Accordingly, the applicable VaR margin on such securities
shall be higher of 1.73 times Scrip VaR and 5.20 times Index VaR. (where scrip VaR is higher of NSE/BSE scrip
VaR and Index VaR is higher of NSE/BSE Index VaR).
The contents of SEBI letter MRD/SE/SK/4121/2005, dated 25th May 2005 are reproduced below:
Quote
General Manager
Market Regulation Department
MRD/SE/SK/4121/2005
25th May 2005
The Administrator
Calcutta Stock
Exchange
7, Lyons Range
Calcutta – 700
001
Dear Sir,
Sub:
Comprehensive Risk Management Framework for the Cash Market – Categorization,
levy of VaR margin and Extreme Loss Margin (ELM)
1. Please refer to
your letter dated May 13, 2005 on the captioned subject.
2. As regards the
Categorization, levy of VaR margin and Extreme Loss Margin (ELM) in respect of
National Securites and Local Securities, we advise you as under:
National
Securities
Categorization,
levy of VaR margin and Extreme Loss Margin (ELM)
You are advised
to strictly comply with the provisions of Clause 3.3 (d) of Annexure to the
circular dated February 23, 2005
Local Securities
Categorization, levy of VaR
margin and Extreme Loss Margin (ELM)
We agree to your proposal to
treat these securities as Group III and levy margins accordingly. As regards imposition of ELM on the local
securities, we advise you to calculate ELM strictly in accordance with the
circular dated February 23, 2005 or impose a flat rate of 10% as proposed by
you, whichever is higher.
Yours faithfully,
V.S. Sundaresan.
Unquote
Secretary