Clearing members are permitted to pledge shares of Liquid (Group I) Equity Shares as per Capital Market Segment and units of mutual fund as communicated to the members from time to time in electronic form ('demat securities') in the designated depository accounts maintained with the approved custodians in this regard. These securities shall be pledged in favour of National Securities Clearing Corporation Limited. A deed of pledge is required to be executed with the custodian in specified formats. The Clearing Corporation may revise the list of approved securities and the haircuts from time to time. Clearing Members who have deposited securities which have been discontinued from the list of approved securities, shall be required to take due care to replace such securities.

Valuation
The securities are valued on a daily basis based on the closing price of the security in the Capital Market segment of the National Stock Exchange of India Ltd. The VaR margin rate VaR margin rate applicable for the security in the Capital Market segment shall be applied as haircut on the value of the securities provided by the clearing 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 pledged. Valuation of securities shall be done by the approved custodians at such periodic intervals as may be specified by the Clearing Corporation from time to time.

Foreign Sovereign Securities as Collateral
Clearing members may collect Foreign Sovereign Securities as collateral from Foreign Institutional Investors (FIIs) for Exchange Traded Derivative Transactions and provide the same as collateral to the Clearing Corporation. The methodologies for acceptance of foreign sovereign securities shall be as under:

1. Only US Government securities with ‘AAA’ rating shall be eligible to be provided as collateral.





2. The clearing members shall pledge the securities in favour of the Clearing Corporation through the approved custodian. For this purpose the clearing member shall be required to open account with the approved custodians. Currently, Deutsche Bank, New York has been designated as approved custodians for acceptance of foreign sovereign securities. The clearing members are required to contact Deutsche Bank for opening of necessary accounts.





3. The clearing members shall be required to execute the following agreements before providing foreign sovereign securities as collaterals to the Clearing Corporation



• Clearing member- NSCCL agreement


• Clearing member-FII agreement


• Indian Deed of pledge in favour of NSCCL


• New York Collateral


• Account control agreement




4. In respect of FII clients who shall be providing foreign sovereign securities the clearing member shall be required to execute the revised Clearing Member-Constituent agreement





5. The foreign sovereign securities shall be valued on a daily basis and converted into rupee terms based on the latest available RBI reference rate or such other rate as specified by the Clearing Corporation from time to time.





6. A hair cut of 20% or such other hair cut as specified by the Clearing Corporation from time to time shall be applied on the value of foreign securities pledged by the clearing members. The net value after applying the hair cut shall be added to the cash component of the liquid assets of the clearing member





7. The net value of foreign sovereign securities shall not exceed 10% of the total value of the cash component of the liquid assets of the clearing member.





8. The clearing member may request for release of foreign sovereign securities to the Clearing Corporation as per the format.