NATIONAL STOCK EXCHANGE OF INDIA LIMITED

Dated: June 30, 2003

Circular No.: NSCC/CMP/338

_______________________________________________________________________

Circular No.NSCC/CM/C&S/249 dated June 30, 2003 issued by National Securities Clearing Corporation Limited (NSCCL) to the Clearing Members of NSCCL is enclosed. All Trading Members of the Exchange who are also the Clearing Members of the Clearing Corporation are required to comply with the said Circular and any modifications thereto as may be issued by the Clearing Corporation from time to time.  Non-compliance with the said Circular will be treated as breach of the Rules, Bye-Laws and Regulations of the Exchange. The Clearing Corporation will monitor the compliance and take suitable action for non - compliance.

 

For National Stock Exchange of India Limited

  

Suprabhat Lala

Manager

 

NATIONAL SECURITIES CLEARING CORPORATION LIMITED

CAPITAL MARKET SEGMENT

 

Ref. No.: NSCC/CM/C&S//249                                                                    June 30, 2003

Download No.: NSE/CMPT/4244

 

To,

Clearing Members/Custodians/PCM’s

 

Sub: Composition of Capital and increase in Cash Component of additional capital and margins

Dear Members,

 

This is in pursuance of SEBI Circular No. SEBI/SMD/SE/Cir-22/2003/11/06 dated June 11, 2003 (copy enclosed as Annexure I), members are requested to note the following details of the revised provisions with respect to composition of Capital:

 

Cash and non-cash component of additional base capital (ABC) and margins:

a)      The minimum cash component of additional base capital and margins shall be 50% of the total ABC and cash margins. 

b)      The cash component may be in the form of cash or cash equivalents. Cash equivalents are classified as follows.

               i.      FDR’s from approved banks

             ii.      Bank guarantees from approved banks, whose networth is more than Rs. 500 crores. (List of the same is given in Annexure – II)

            iii.      Government Securities. The procedure for acceptance and list of securities is as specified in circular no.:            NSCC/F&O/C&S/202/2003 (Download Ref. No.: NSE/CMPT/4221) June 23, 2003.

           iv.      Units of the schemes of liquid mutual funds or government securities mutual funds.   

c)      The haircut for Government Securities shall be 10%

d)      The haircuts for units of liquid mutual funds or government securities mutual funds shall be 10% of Net Asset Value (NAV).

e)      Units of all Mutual Funds schemes except Liquid Mutual Funds and Government Securities Mutual Funds (in demat) shall be eligible security for the purpose of non-cash component of additional capital and margin subject to a haircut equivalent to the VaR of the unit’s NAV plus any exit load charged by the mutual fund.

 

List of Mutual Fund Schemes with classification as Liquid Mutual Funds, Government Securities Mutual Funds and other Mutual funds is available at the website www.amfiindia.com.

 

The above shall be effective from July 01, 2003.

 

Yours faithfully,

For National Securities Clearing Corporation Ltd

 

 

Prashant Bhatnagar

Manager

Annexure I

SEBI/SMD/SE/Cir-22/2003/11/06                                                                   June 11, 2003

Managing Directors and Executive Directors

Of all the Stock Exchanges

Dear Sir/Madam,

Sub:- Composition of Capital and Margins

The SEBI circular no SMDRP/Policy/Cir-19/99 dated July 02, 1999 specifies the additional capital required to be deposited in the form of cash, fixed deposit receipts (FDRs), bank guarantees and securities. Presently the cash component of additional capital and margins is specified as 30%. The issue of composition of additional capital and margins has been discussed by the Advisory Committee on Derivatives and Market Risk Management and based on the deliberations of the Committee, it has been decided that the revised composition of additional capital and margins and the eligibility criteria for securities shall be as follows:-

1. Cash and non-cash component of additional capital and margins

1.      The minimum cash component of the additional capital and margins shall be increased from the existing level of 30% to 50 %.

2.      The cash component of additional capital and margins shall be increased to 50% in a manner so that this is complied with by the member brokers of the exchange by the end of June 2003.

3.      The mark to market margin shall continue to be collected by the exchanges only in the form of cash, bank guarantee and FDRs as prescribed earlier by SEBI circular no SMDRP/Policy/Cir-19/99 dated July 02, 1999

4.      The cash component may be in the form of cash or cash equivalents. Cash equivalents would be as follows.

1.5 Cash equivalent

a. Cash equivalent shall include FDRs, bank guarantees (as specified below), Government securities and units of the schemes of liquid mutual funds or government securities mutual funds (by whatever name called which invest in government securities).

b. The haircut for Government securities shall be 10%.

c. The hair cut for units of the schemes of liquid mutual funds or government securities mutual funds (by whatever name called which invest in government securities) shall be atleast 10% of Net Asset Value (NAV).

d. The bank guarantees shall be considered as cash equivalent only if the guarantees have been provided by the banks whose networth is more than Rs 500 crores.

i) The exchanges shall lay down exposure limits either in rupee terms or as percentage of the Trade Guarantee Fund (TGF)/Settlement Guarantee Fund (SGF) that can be exposed to a single bank directly or indirectly and in any case the exposure of the TGF/SGF to any single bank shall not be more than 15% of the total liquid assets forming part of TGF/SGF of the exchange.

ii) The exposure as mentioned above would include guarantees provided by the bank for itself or for others as well as debt or equity securities of the bank which have been deposited by members for additional capital or margins.

2.      Eligible Securities and its Valuation
1.      While Section 1 specifies the cash and non-cash component of additional capital and margin and clause 1.5 in particular specifies the securities including the units of certain types of mutual fund schemes which could be considered as cash equivalent, this section specifies the type of securities, including equity shares, units of mutual funds which could be considered as eligible securities and hair cut for the purpose of non-cash component of base minimum capital, additional capital and margin.

Additional Capital

a.      Equity shares classified in Group I at the stock exchange in accordance with the parameters of volatility and liquidity as prescribed in SEBI circular no. SMD/POLICY/CIR-9/2003 dated March 11, 2003 shall be eligible as security for the non-cash component of the additional capital and margin subject to haircut equivalent to the respective VaR of the equity shares.

b.      Units of all mutual funds shall also be eligible security for the purpose of non-cash component of additional capital and margin subject to a haircut equivalent to the VaR of the unit’s NAV plus any exit load charged by the mutual fund.

c.      The valuation of a & b above shall be done on a daily basis.

Base Minimum Capital

d.      The eligible shares for the purpose of the securities portion of the base minimum capital shall only be those which are classified as Group I in terms of the parameters of volatility and liquidity as stipulated in SEBI circular No. SMD/Policy/Cir-9/2003 dated March 11, 2003, subject to a standard haircut of 15%. However, the smaller stock exchanges can also accept the shares that are in the Group I of the BSE or the NSE for the purpose of base minimum capital. The valuation for these shares would be done atleast once a week. Thus the type of eligible securities for base minimum capital specified in SEBI circular No. SMDRP/Policy/Cir-19/1999 dated July 2, 1999, stands revised.

3. The undersigned has been authorised to direct the stock exchanges to

a.      make necessary amendments to the bye-laws, rules and regulations for the implementation of the above decision immediately.

b.      bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminate the same on the website for easy access to the investors; and

c.      communicate to SEBI, the status of the implementation of the provisions of this circular in Section II, item no. 13 of the Monthly Development Report for the month of June 2003.

This circular is being issued in exercise of powers conferred by section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with section 10 of the Securities Contracts(Regulation) Act 1956, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

P K Bindlish

 

                                                                                                            Annexure II

 

Net worth more than Rs.500 crores - List of Banks

 

Sr. No

Bank Name

1

STATE BANK OF SAURASHTRA

2

STATE BANK OF TRAVANCORE

3

VYSYA BANK LTD

4

BANK OF AMERICA

5

INDUSIND BANK LTD

6

UTI BANK LTD

7

VIJAYA BANK

8

DEUTSCHE BANK

9

STATE BANK OF BIKANER & JAIPUR

10

ABN AMRO BANK

11

BANK OF MAHARASHTRA

12

DENA BANK

13

UNITED BANK OF INDIA

14

UCO BANK

15

JAMMU & KASHMIR BANK LTD

16

ANDHRA BANK

17

ALLAHABAD BANK

18

HONGKONG SHANGHAI BANK CORP

19

INDIAN OVERSEAS BANK

20

SYNDICATE BANK

21

STATE BANK OF PATIALA

22

UNION BANK OF INDIA

23

ORIENTAL BANK OF COMMERCE

24

CITIBANK

25

HDFC BANK LTD

26

STANDARD CHARTERED BANK

27

CORPORATION BANK

28

BANK OF INDIA

29

PUNJAB NATIONAL BANK

30

CANARA BANK

31

BANK OF BARODA

32

ICICI BANK LTD

33

STATE BANK OF INDIA

34

THE TORONTO-DOMINION BANK