NOTICE
Dated 27.2.2013
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RISK
MANAGEMENT POLICY ON COLLATERAL DEPOSITS AND SURVEILLANCE OF THE TRADING
With Effect From 1.3.2013
The
Business model for CSE consists trading of Brokers in CSE as well as BSE-CSE
and CSE-NSE arrangements.
Comprehensive
Risk management frame work for CSE cash market already notified on 25th
May 2005 in line with SEBI circular.
In case
of trade in NSE and BSE the following policy adopted:
The clients are linked or mapped
to the Brokers, herein after called as Branches, and are engaged in trading
from these Brokers. Controlling and monitoring of these trades are being done
by RMS and Surveillance department.
Major
Functions of RMS/Surveillance:
In short, the Risk management in
relation to all the trading activities for Clients is handled by RMS and
Surveillance Dept.
HIERARCHY:
In CSE,
Surveillance department employs one executives & one staff, who are
reporting to Manager-Surveillance. Manager Surveillance is reporting to
MD&CEO/GM. Decisions relating to routine and risk management activities are
made by Manager-Surveillance. Activities which contain high risk and
complications are to be put forward to the notice of senior executives like
DGM/GM/MD & CEO and proper guidance should be taken before executing any
action on such activities.
The
Calcutta Stock Exchange Limited classifies Brokers into High Risk Profile,
Medium Risk Profile and Low Risk Profile. Such classification is done based on
a relationship maintained with Brokers and based on the input received from
Surveillance department of NSE and BSE. Apart from this, all the Brokers are
evaluated based on the initial margin and subsequent margins paid by them. The
trading patterns of Brokers are also taken into consideration for
classification of risk profile.
POLICY ON COLLATERAL DEPOSITS:
Trading
members are required to provide liquid assets which adequately cover upfront
margin requirements. A trading member may deposit liquid assets in the form of
cash, bank guarantees, fixed deposit receipts, approved securities and any
other form of collateral as may be prescribed from time to time. The total
liquid assets comprise of the cash component and the non-cash component wherein
the cash component shall be at least 50% of liquid assets.
Approved Securities:
Trading
member are encouraged to deposit the upfront margin through pledge FD or in
cash as CSE do not get back to back margin in NSE and BSE for Pledge securities and Bank guarantee.
Accordingly CSE discourage members to deposits which are not allowed to
transfer to NSE and BSE for margin.
As a
temporary arrangement, Trading members are permitted to pledge shares which
includes existing approved list of securities by the Exchange and all scripts
listed with NSE, and BSE. And/or units of mutual fund subject to assessment of
Head of Risk Management department. Securities are required to be pledged in
electronic form ('demat securities') in the CSE’s
designated depository accounts. These securities shall be pledged in favour of
The Calcutta Stock Exchange Ltd.(CSE). CSE may revise
the list of securities and the haircuts from time to time as decided after
assessing the risk by the Head of Risk management.
Valuation
The
securities are valued on a daily basis based on the closing price of the
security in the Capital Market segment of NSE / BSE. The haircut applicable for
the security will be VaR of BSE /NSE or as per the
assessment of head of Risk Management department. This haircut shall be applied
on the value of the securities provided by the Trading Members to arrive at the
net value of the securities. Only the value net of applicable haircuts shall be
considered as the value of the securities.
Fixed Deposit:
Members
are permitted to submit fixed deposit receipts as collateral towards liquid
assets. Fixed deposits are allowed from those banks which are permitted by BSE
and NSE.Those FDs will be third party FD and the same
will be deposited to NSE and BSE as decided by head of Risk management along
with CFO.
Bank Guarantee:
Members
may opt for giving bank guarantee in the specified formats, either for specific
segment from any nationalized banks and any other bank which are approved by
NSE towards liquid assets and also be assessed by the Head of the Risk
management Department along with CFO.
Additionally,
at the time of deposit of the bank guarantee, the clearing member is required
to ensure the following:
The bank guarantee is strictly as per the formats
prescribed by the Exchange.
A bank guarantee for collateral margin deposit
should have validity for a minimum period of 3 months. In case the issuing bank
does not provide for a specific claim period beyond the expiry date in the bank
guarantee, the maturity period of such bank guarantee shall be reduced by 7
days, which would be considered as the claim period of the bank guarantee.
In case bank guarantee is for any segment then in
such cases Trading member should also submit member
letter in the specified format.
While filling the details in a bank guarantee,
clearing members shall ensure that:
No relevant portion is left blank
All handwritten corrections and blanks are attested
by the bank by affixing the bank seal / stamp duly authorised.
All irrelevant portions struck off on the printed
format should also be authenticated by the bank by affixing the bank seal /
stamp duly authorised.
Each page of the bank guarantee should bear the
bank guarantee number, issue date, stamp of the bank and should be signed by at
least two authorised signatories.
The Trading member should also ensure that the bank
guarantee is free from any discrepancy before the same is submitted to the
Exchange.
The stamp paper should be issued either in the name
of the member or in the name of bank, no third party stamp papers are
permissible.
The stamp paper should not be older than 6 months
from the executed date of the bank guarantee/ renewal.
In case
the bank guarantee does not strictly conform to the above-mentioned conditions.
Mutual Funds:
Trading
Members are permitted to pledge open ended mutual fund units available in demat form as collateral towards Liquid assets. A deed of
pledge is required to be executed in specified formats. CSE may revise the list
of approved mutual fund scheme and the haircuts from time to time Valuation
The
mutual funds units are valued based on the Net Asset Value of the mutual fund
unit. The value of the mutual fund unit is reduced by such haircut as may be
prescribed by CSE from time to time to arrive at the collateral value of the
mutual fund unit. The hair cut applicable shall be the VaR
margin rate and exit load if any applicable for the respective mutual fund
scheme. Only the value net of applicable haircuts and exit load shall be
considered as the value of the mutual funds pledged. Valuation of mutual funds
are done by the Exchange at periodic intervals. Further, the total value of
mutual funds units provided as non-cash portion of the liquid assets shall not
exceed 25% of the liquid assets of the respective member.
Units of
money market mutual fund and Gilt funds (including units of open ended liquid
mutual funds or government securities mutual funds) where applicable haircut is
10%.
Trading
member desirous of providing G-Sec/Bonds/ T-Bills shall deposit the same as per
the specific format.
Members
are allowed to deposit G-Sec/Bonds/T-Bills that shall be as per approve list of
NSE/BSE.
G-sec/Bonds/T-bill
shall be accepted as collateral only in electronic form.
General Manager