Dated: 25th May 2005
Sub: Comprehensive Risk Management Framework for the Cash Market
Members attention is invited to the Exchange’s Notice dated March 08, 2005 read with Notice dated 16th May 2005 about the implementation of SEBI Circular No. MRD/DoP/SE/Cir-07/2005, dated February 23, 2005, in respect of Comprehensive Risk Management system to be implemented w.e.f. Monday, May 30, 2005.
In this connection it is reiterated that the aforesaid SEBI Circular shall be strictly enforced w.e.f. 30th May 2005 with the following clarifications/modifications.
Base Minimum Capital of Rs.10 lakhs has to be maintained by every member. Base Minimum Capital will not be available for adjustment towards margins. For all securities whether in BMC or in other deposits the haircut will be as per VaR.
The Exchange shall continue to accept Cash Deposits, Fixed Deposits, Bank Guarantees and shares of eligible listed companies only as deposits from members of the Exchange.
Bank Guarantees issued by Nationalized Banks and HDFC shall only be accepted as cash equivalent deposits from members of the Exchange.
No card value shall be considered as part of the member’s liquid assets for the purpose of Extreme Loss Margin.
All local scrips traded at this Exchange except the “national shares” shall be considered as Illiquid Securities (Group III) only.
“National Shares” which are defined as Group I securities of NSE/BSE shall form a separate group for which margins shall be calculated at NSE and BSE applicable margins, whichever is higher.
All securities traded at this Exchange except “national shares” shall attract the VaR Margin applicable for Illiquid Securities as per SEBI Circular No. MRD/DoP/SE/Cir-07/2005, dated 23rd February 2005. In respect of “national shares” the higher of NSE VaR or BSE VaR shall be charged.
For computation of Extreme Loss Margin for “National Scrips” higher of NSE Extreme Loss Margin Rate and BSE Extreme Loss Margin Rate shall be considered and for all other securities an Extreme Loss Margin of 10% shall be imposed.
The terminals would be deactivated and the pay-out of securities of members who have shortage of funds pay-in withheld on every such occasion of pay-in shortfall as at present.
Upon recovery of the complete shortages, the member shall be permitted to trade subject to his providing a deposit equivalent to his cumulative funds shortage in case of shortfalls on six or more occasions in three months period as the “funds shortage collateral” and such deposit shall be kept with MOP for a period of ten rolling settlements and shall be released thereafter. Such deposits shall not be available for adjustment against margin liabilities and will also not earn any interest.