NSCCL has developed a comprehensive risk containment mechanism for the Currency derivatives segment. The most critical component of a risk containment mechanism for NSCCL is the online position monitoring and margining system. The actual margining and position monitoring is done on-line, on an intra-day basis. NSCCL uses the SPAN' (Standard Portfolio Analysis of Risk) system for the purpose of margining, which is a portfolio based system.
NSCCL collects initial margin up-front for all the open positions of a CM based on the margins computed by NSCCL-SPAN'. A CM is in turn required to collect the initial margin from the TMs and his respective clients. Similarly, a TM is required to collect upfront margins from his clients.
Initial margin requirements are based on 99% value at risk over a one day time horizon. However, in the case of futures contracts, where it may not be possible to collect mark to market settlement value, before the commencement of trading on the next day, the initial margin is computed over a two-day time horizon, applying the appropriate statistical formula. The methodology for computation of Value at Risk percentage is as per the recommendations of SEBI from time to time.
Initial margin requirement for a member:
- For client positions - is netted at the level of individual client and grossed across all clients, at the Trading/ Clearing Member level, without any setoffs between clients.
- For proprietary positions - is netted at Trading/ Clearing Member level without any setoffs between client and proprietary positions.
For the purpose of SPAN Margin, various parameters are specified from time to time.
IIn case a trading member wishes to take additional trading positions his CM is required to provide Margin deposit to NSCCL. MD can be provided by the members in the form of Cash, Bank Guarantee, Fixed Deposit Receipts and approved securities & Government securities.
Clearing members are subject to extreme loss margins in addition to initial margins. The applicable extreme loss margin on the mark to market value of the gross open positions is as follows or as may be specified by the relevant authority from time to time.
|Futures: 1% of the value of gross
Options: 1.5% of the value of gross open position (For short option positions)
|0.3% of the value of gross open position||0.5% of the value of gross open position||0.7% of the value of gross open position|
The following margin reports are downloaded to members on a daily basis:
- Margin Statement of Clearing Members : MG-09
- Margin Statement of Trading Member/ Custodial Participant : MG-10
- Margin Payable Statement of Clearing Member : MG-11
- Detail Margin File of Clearing Members : MG - 12
- Client Level Margin File of Trading Members : MG-13
- Detailed Intraday provisional margin report for clearing member MG-12
- Client Level Intraday provisional Margin File of Trading Members: MG-13
- Details of collaterals submitted by clearing member (CL01)
- Details of Margin Reports