26-Apr-2024 | 83.3150

24-Apr-2024 16:59

Lac Crs 398.10 | Tn $ 4.78

24-Apr-2024

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Liquid Assets

Clearing members are required to provide liquid assets which adequately cover various margins and liquid net worth requirements. A clearing member may deposit liquid assets in the form of cash, bank guarantees, fixed deposit receipts, approved securities and any other form of collateral as may be prescribed from time to time. The total liquid assets comprise of the cash component and the non-cash component wherein the cash component shall be at least 50% of liquid assets.

Details of security deposit to be maintained as Liquid Net worth are specified as under:

Liquid Net worth shall be computed as total liquid assets less initial margin payable at any point in time. The clearing member shall meet with the liquid net worth requirements prescribed by the NSE Clearing at all points of time.

Minimum liquid net worth requirement for clearing members:

Every clearing member of the NSE Clearing is required to maintain a minimum liquid net worth of Rs.50 lakhs with the NSE Clearing in the following manner:

  • (a) Rs.25 lakhs in the form of cash and
  • (b) Rs.25 lakhs in any one or combination of the forms of collaterals accepted towards liquid assets.

Any failure on the part of a clearing member to meet with the deposit requirements as given above in point number 1 and 2, at any point of time, will be treated as a violation of the Rules, Bye-Laws and Regulations of the NSE Clearing. In such case the NSE Clearing may initiate suitable action as given below or as prescribed by the relevant authority from time to time.

If the security deposit shortage is equal to or greater than Rs. 5.00 lakhs, the NSE Clearing may advise the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of custodial participants clearing through such clearing members.

If the security deposit shortage is less than Rs. 5.00 lakhs, the member would be given one calendar weeks’ time to replenish the shortage and if the same is not done within this timeframe, NSE Clearing may advise the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of custodial participants clearing through such clearing members.

In addition, the outstanding positions of such clearing member and/ or trading members and/ or constituents, clearing and settling through such clearing member, may be closed out forthwith or any time thereafter by the Exchange, at the discretion of the NSE Clearing, to the extent possible, by placing at the Exchange, counter orders in respect of the outstanding position of such clearing member without any notice to the clearing member and/ or trading members and/ or constituents, and such action shall be final and binding on the clearing member and/ or trading members and/ or constituents. NSE Clearing may also initiate such other risk containment measures as it deems fit with respect to the open positions of the clearing member and/ or trading members and / or constituents.

NSE Clearing may, in addition to the foregoing provisions, take additional measures like, imposing penalties, collecting appropriate deposits, invoking bank guarantees/ fixed deposit receipts, realising money by disposing off the securities and exercising such other risk containment measures as it deems fit and may further take such disciplinary action as it may deem fit and appropriate in this regard.

Clearing Members may submit deposit in the form of cash by making the required amount available in their respective clearing bank account and sending an authorization to the Clearing Corporation for debiting the said amount from their clearing account. The same can be provided through a web based facility called Collateral Interface for Members (CIM) which enables the clearing members to log in through internet. Members shall log in through specific user-ids and passwords into CIM. The benefit of such cash deposit requests shall be subject to bank confirmation from the respective clearing bank. To obtain a Login User ID, members are required to send their request to the Clearing Corporation in the format provided.

A clearing member who has authorised the Clearing Corporation to debit his clearing account as above shall ensure due performance of the commitment. Non-fulfilment of such obligation will be treated as a violation and/ or non-performance of obligations and shall attract consequences, penalty and/ or penal charges as applicable to violations.

Clearing members are permitted to submit fixed deposit receipts as collateral towards liquid assets. The FDR should be issued either in favour of: "Custodian Name" (as the case may be) - A/c Clearing Member Name" in case to be deposited with approved custodians or "NSE Clearing Limited A/c Clearing Member Name" in case to be deposited with the NSE Clearing.

Clearing members need to ensure following before submitting FDRs to approved custodians or NSCCL as the case may be:

  • Clearing members have to issue a letter to NSE Clearing/approved custodians as per the formats specified.
  • Clearing members have to submit a letter given by approved banks issuing the FDR to NSE Clearing/ approved custodians as per formats specified.
  • The FDR should have validity for a minimum period of 3 months in case of margin deposit and for a minimum period of 12 months in case of security deposit.
  • The minimum value of FDR that may be accepted is Rs.1 lakhs.
  • The FDR should be issued by any of the branches of approved banks and should be payable in the cities of: Mumbai, New Delhi, Chennai, Kolkata, Ahmedabad and Hyderabad.

Reminder letters

Reminder letters are downloaded on a monthly basis through the extranet in respect of the Fixed deposits those are due for renewal in the following month. Path for the letter is FAOFTP/F/LETTERS/DNLD. Further, the file naming convention for the same is F_REMINDERS_MEMBER CODE_DDMMYYYY.LIS.

Renewal letters

Renewals of the FDRs are the sole responsibility of the clearing members. In case of renewal of FDRs, the clearing members are required to furnish the renewal documents strictly in the prescribed formats.

Clearing Members may opt for giving bank guarantee in the specified formats, either for specific segment or for any of the clearing segment, from any approved banks towards liquid assets.

In case the bank guarantee does not strictly conform to the above-mentioned conditions, the same shall not be accepted by NSE Clearing 

Clearing members are advised to check their applicable limit before getting their bank guarantees issued.

Electronic Bank Guarantee

NSE Clearing Ltd. (NCL) in collaboration with National E-Governance Service Limited (NeSL) provides the facility for accepting Electronic Bank Guarantees(E-BG).

Members can approach banks empanelled by NCL for issuance of E-BG. (The list of Banks eligible of issuance of E-BG is provided in annexure 1)

The bank guarantee shall be strictly in the format prescribed by NCL. (Existing format for BG in physical form shall continue for E-BG)

Electronic SFMS Message

Members are required to ensure that Banks issuing BG in favour of Clearing Corporation send e-messages through SFMS for all new issuance/renewals of the BG. Members shall ensure that SFMS message is sent by the issuing bank before the new/renewal BG is submitted to Clearing Corporation. The exposure towards new issuance/renewals of the bank guarantees shall be provided only after receipt of the SFMS message by Clearing Corporation

a) Reminder letter

Reminder letters are downloaded on a monthly basis through the extranet in respect of the Bank Guarantees those are due for renewal in the following month. Path for the letter is FAOFTP/F/LETTERS/DNLD. Further, the file naming convention for the same is F_REMINDERS_MEMBER CODE_DDMMYYYY.LIS.

b) Renewal of Bank Guarantees

Clearing members are required to ensure that the renewal of the bank guarantee is submitted to the Clearing Corporation in the prescribed format well in advance before the date of expiry of the bank guarantee.

 

Clearing members are permitted to pledge shares of Liquid (Group I) Equity Shares in demat form as collateral towards liquid assets under the Margin Pledge -Re Pledge facility provided by NSDL and CDSL. These securities shall be pledged in favour of NSE Clearing Limited. A deed of pledge is required to be executed with the custodian in specified formats. NSE Clearing 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 haircut applicable for the security shall be as specified in the monthly circular for approved list of securities. This haircut shall be applied 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. 

Members are permitted to pledge Liquid (Group I) Equity Shares in demat form as collateral towards liquid assets under the Margin Pledge -Re Pledge facility provided by NSDL and CDSL.  A deed of pledge is required to be executed with the NSE Clearing in specified formats. The Clearing Corporation may revise the list of approved mutual fund scheme and the haircuts from time to time. Members who have deposited mutual funds units which have been discontinued from the list of approved scheme, shall be required to take due care to replace such units.

 

Valuation

The mutual funds units are valued based on the Net Asset Value of the mutual fund unit. The value of the mutual fund unit is reduced by such haircut as may be prescribed by the NSE clearing from time to time to arrive at the collateral value of the mutual fund unit. The hair cut applicable shall be the VaR margin rate and exit load if any applicable for the respective mutual fund scheme. Only the value net of applicable haircuts and exit load shall be considered as the value of the mutual funds pledged. Valuation of mutual funds is done by approved custodians at periodic intervals as specified by the NSE Clearing from time to time. Further, the total value of mutual funds units provided as non-cash portion of the liquid assets shall not exceed 35% of the liquid assets of the respective member for debt Mutual funds and 25 % for non-debt mutual funds.

Units of money market mutual fund and Gilt funds (including units of open ended liquid mutual funds or government securities mutual funds) where applicable haircut is 10%.

  • Clearing member desirous of providing G-Sec / T-Bills shall enter into an agreement with NSE Clearing as per the format.

    Download Format of Agreement for constituent sgl account (.zip)

  • NSE Clearing shall prescribe list of G-Sec/T-Bills that shall be eligible for acceptance as collateral from time to time.
  • G-sec/T-bill shall be accepted as collateral only in electronic form. Clearing members desirous of providing G-Sec/T-Bills as collateral shall put a request in CIM. NSE Clearing shall confirm the transaction entered on the NDS, based on the information received from member.
  • The details of NSE Clearing - SGL-II account is as follows:
    Name of the Account National Securities Clearing Corporation Limited
    Member ID BYA00168
    SGL – II A/c No. SG020168
  • For release of G-Sec / T-bills, clearing members shall put a request in CIM. The release of G-Sec/T-Bill shall be processed only at end of day. The G-sec/T-bill released by NSE Clearing shall be entered on NDS under Settlement-Transfer Order-Clearing Agency Withdrawal. Clearing member shall ensure that such transactions are approved on NDS at their end.
  • G-Sec/T-Bill shall be valued daily based on previous day's MTM prices as specified by CCIL
  • Haircut shall be applied on the value of G-Sec/T-bill provided as collateral by clearing members. The value after applying the hair cut shall be added to the cash component of the liquid assets of the clearing member.
  • Periodic coupon / redemption payments received on the G-Sec/T-Bills provided by the member shall be passed on to the member by NSE Clearing immediately upon receipt of relative interest/redemption from Reserve Bank of India.

Procedure for collateral allocation

  • While depositing Cash, FDR, BG or Government Securities provided through the SGL/CSGL route (Hereinafter referred to as “Other forms of collateral”), the Clearing Members (CMs) shall allocate these collaterals into proprietary account of CM, and/or proprietary account of any Trading Member (TM) clearing through the CM, and/or account of any of the clients (including Custodial Participants (CPs)) clearing through the CM, and/or of any of the clients trading through the TM who in turn is clearing through the CM, segment-wise
  • The benefit for the other forms of collateral deposited shall be provided by Clearing Corporation only after receiving the allocation of the same from the CM

 

Change of allocation

CMs shall be permitted to change the allocation of other forms of collateral deposited with NSE Clearing (including change to another segment where the member is CM). CMs to ensure that the value allocated to any TM/CM/client does not exceed the value of actual collateral received from that TM/CP/client (excluding the securities collateral through margin pledge mechanism and repledge to NSE Clearing). However, such change of allocation shall be permitted subject to adequacy of available collateral with NSE Clearing after the change vis-à-vis the margin obligation of CM/TM/CP/Client.

Withdrawal/ Maturity of collateral

Other forms of collateral shall be released only if sufficient amount is available as unallocated collateral. Accordingly, CMs shall ensure that sufficient amount is unallocated prior to placing release request for other forms of collateral

In case of collateral provided in the form of BGs and FDRs; the value of the matured BG/FDR shall be reduced from CM’s collateral as per the existing process. Due to this, the CMs may go into risk reduction mode because of reduction in the collateral limits

 

Updated on: 29/12/2023