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Margins

Categorisation of stocks for imposition of margins

The Stocks which have traded atleast 80% of the days for the previous six months shall constitute the Group I and Group II.

Out of the scrips identified above, the scrips having mean impact cost of less than or equal to 1% shall be categorized under Group I and the scrips where the impact cost is more than 1, shall be categorized under Group II.

The remaining stocks shall be classified into Group III.

The impact cost shall be calculated on the 15th of each month on a rolling basis considering the order book snapshots of the previous six months. On the basis of the impact cost so calculated, the scrips shall move from one group to another group from the 1st of the next month.

For securities that have been listed for less than six months, the trading frequency and the impact cost shall be computed using the entire trading history of the security.

Categorisation of newly listed securities

For the first month and till the time of monthly review a newly listed security shall be categorised in that Group where the market capitalization of the newly listed security exceeds or equals the market capitalization of 80% of the securities in that particular group. Subsequently, after one month, whenever the next monthly review is carried out, the actual trading frequency and impact cost of the security shall be computed, to determine the liquidity categorization of the security.

In case any corporate action results in a change in ISIN, then the securities bearing the new ISIN shall be treated as newly listed security for group categorization.

Daily margins payable by members consists of the following:
1. Value at Risk Margin
2. Extreme Loss Margin
3. Mark to Market Margin

Daily margin, comprising of the sum of VaR margin, Extreme Loss Margin and mark to market margin is payable.

Value at Risk Margin

All securities are classified into three groups for the purpose of VaR margin

For the securities listed in Group I, scrip wise daily volatility calculated using the exponentially weighted moving average methodology shall be applied to daily returns in the same manner as in the derivatives market. The scrip wise daily VaR would be 3.5 times the volatility so calculated subject to a minimum of 7.5%.

For the securities listed in Group II, the VaR margin shall be higher of scrip VaR (3.5 sigma) or three times the index VaR, and it shall be scaled up by root 3.

For the securities listed in Group III, the VaR margin would be equal to five times the index VaR and scaled up by root 3.

In case of securities in Trade for Trade segment (TFT segment) VaR as applicable to Group 3 (illiquid securities) shall be applicable

VaR margin rate for a security constitutes the following:

Value at Risk (VaR) based margin, which is arrived at, based on the methods stated above. The index VaR, for the purpose, would be the higher of the daily Index VaR based on S&P CNX NIFTY or BSE SENSEX. The index VaR would be subject to a minimum of 5%.

Security specific Margin: NSCCL may stipulate security specific margins for the securities from time to time.

The VaR margin rate computed as mentioned above will be charged on the net outstanding position (buy value-sell value) of the respective clients on the respective securities across all open settlements. There would be no netting off of positions across different settlements. The net position at a client level for a member are arrived at and thereafter, it is grossed across all the clients including proprietary position to arrive at the gross open position.

For example, in case of a member, if client A has a buy position of 1000 in a security and client B has a sell position of 1000 in the same security, the net position of the member in the security would be taken as 2000. The buy position of client A and sell position of client B in the same security would not be netted. It would be summed up to arrive at the member’s open position for the purpose of margin calculation.

The VaR margin shall be collected on an upfront basis by adjusting against the total liquid assets of the member at the time of trade.

The VaR margin so collected shall be released on completion of pay-in of the settlement.

The details of all margins (VAR, extreme loss margin and mark to market) as at end of each day will be downloaded to members in their respective Extranet directory.

VaR margin rate & Security category


Extreme Loss Margin

The Extreme Loss Margin for any security shall be higher of:

5%, or

1.5 times the standard deviation of daily logarithmic returns of the security price in the last six months. This computation shall be done at the end of each month by taking the price data on a rolling basis for the past six months and the resulting value shall be applicable for the next month.

The Extreme Loss Margin shall be collected/ adjusted against the total liquid assets of the member on a real time basis.

The Extreme Loss Margin shall be collected on the gross open position of the member. The gross open position for this purpose would mean the gross of all net positions across all the clients of a member including its proprietary position.

There would be no netting off of positions across different settlements. The Extreme Loss Margin collected shall be released on completion of pay-in of the settlement.

The details of all margins (VAR, extreme loss margin and mark to market) as at end of each day will be downloaded to members in their respective Extranet directory.


Mark-to-Market Margin

Mark to market loss shall be calculated by marking each transaction in security to the closing price of the security at the end of trading. In case the security has not been traded on a particular day, the latest available closing price at the NSE shall be considered as the closing price. In case the net outstanding position in any security is nil, the difference between the buy and sell values shall be considered as notional loss for the purpose of calculating the mark to market margin payable.

The mark to market margin (MTM) shall be collected from the member before the start of the trading of the next day.

The MTM margin shall also be collected/adjusted from/against the cash/cash equivalent component of the liquid net worth deposited with the Exchange.

The MTM margin shall be collected on the gross open position of the member. The gross open position for this purpose would mean the gross of all net positions across all the clients of a member including its proprietary position. For this purpose, the position of a client would be netted across its various securities and the positions of all the clients of a broker would be grossed.

There would be no netting off of the positions and setoff against MTM profits across two rolling settlements i.e. T day and T-1 day. However, for computation of MTM profits/losses for the day, netting or setoff against MTM profits would be permitted.

 

 

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