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About Risk Management

NSE Clearing has put in place a comprehensive risk management system. NSE Clearing ensures that clearing member obligations are commensurate with their net worth.

Margins for Normal market trades

The core of the risk management system is the liquid assets deposited by members with the Exchange/Clearing Corporation. These liquid assets shall cover the Initial Margin and Extreme Loss Margin requirements for debt securities. Initial margin shall be based on a worst case loss of a portfolio of an individual client across various scenarios of price changes so as to cover a 99% VaR over one day horizon.

The minimum initial margin shall be 2% for residual maturity up to three years, 2.5% for residual maturity above three years and up to five years; and 3% for maturity above five years.

Clearing Corporation shall adopt SPAN® system for initial margin computation. Loss numbers is computed by applying the applicable margin rate to the last traded price expressed in terms of clean price i.e. without taking accrued interest into account.

The ELM for any bond shall be 2% of the last traded price expressed in terms of clean price Settlement Guarantee shall be provided for the deals on retail and institutional platform.

Exemption from Margins

Members can avail margin exemption for sale trades, by giving specific client-ISIN instructions for each trading member clearing through them. Positions for which early pay-in of securities is made shall be exempt from margin computation.

Close out facility

An online facility to close – out open positions of members, whose trading facility is withdrawn for any reason, is provided. On disablement, trading members may be allowed to place close-out orders through this facility. Only orders which result in reduction of existing open positions at the client level shall be accepted through the close-out facility.

Margin shortfall

The members shall not be permitted to trade with immediate effect.

There is a penalty for margin violation.

Penalty applicable for margin violation is levied on a monthly basis based on slabs as mentioned below:

Instances of Disablement Penalty to be levied
1st instance 0.07% per day
2nd to 5th instance of disablement 0.07% per day +Rs.5000/- per instance from 2nd to 5th instance
6th to 10th instance of disablement 0.07% per day+ Rs. 20000 ( for 2nd to 5th instance) +Rs.10000/- per instance from 6th to 10th instance
11th instance onwards 0.07% per day +Rs. 70,000/- (for 2nd to 10th instance) +Rs.10000/- per instance from 11th instance onwards. Additionally, the member will be referred to the Disciplinary Action Committee for suitable action

Instances as mentioned above shall refer to all disablements during market hours in a calendar month. The penal charge of 0.07% per day shall is applicable on all disablements due to margin violation anytime during the day.

Non-allocation / rejection of institutional trades

In case of rejection/non-confirmation of any institutional/non-institutional trades by clearing member a penalty of 0.10% of the unallocated / rejected / unconfirmed value or Rs. 10,000/- whichever is lower per settlement shall be levied.

Members can provide the deposits towards margin and/ or other obligations in any one or combination of the following forms: Cash Fixed Deposit Receipts (FDRs) issued by approved banks, Bank Guarantee in favour of NSE Clearing Limited (formerly known as National Securities Clearing Corporation Limited) from approved banks Government of India Securities/T-Bills Corporate bonds 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. Member may request the Clearing Corporation to release deposits held by the Clearing Corporation. Such requests may be considered by the Clearing Corporation if the Clearing Corporation chooses not to exercise its lien pursuant to the Rules, Byelaws and Regulations and subject to availability after due adjustments for the due fulfilment of all obligations and liabilities. A facility is being provided in the Collateral Interface for Member (CIM) to enable members to transfer collaterals from one segment to other segment on an intraday basis.
Updated on: 24/06/2022
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