1. This
is in continuation to circulars MRD/DoP/SE/Cir-07/2005 dated February 23, 2005,
MRD/DoP/SE/Cir-06/2008 dated March 19, 2008 and MRD/DoP/SE/Cir-10/2008 dated
April 17, 2008 on the comprehensive risk management for the cash market and
margining of institutional trades in the cash market.
2. In
order to improve the efficiency of the use of the margin capital by market
participants and as an initial step towards cross margining across cash and
derivatives markets, margins shall be levied on cash market positions which
have off-setting stock futures positions in the derivatives market as given
below:
a. Cross margin facility will be available initially for institutional trades.
b. Cross margin facility will be available to positions in cash market having corresponding off-setting positions in the stock futures market.
c. For positions in the cash market which have corresponding offsetting positions in the stock futures, VaR margin shall not be leviedon the cash market position to the extent of the off-setting stock futures market position.
d. Extreme Loss Margin and Market to Market Margin shall continueto be levied on the entire cash market position
e. Near month stock futures positions shall not be considered forcross margin benefit three days prior to expiry (as currently beingdone in the case of calendar spread.)
f. There will be no change in the margins on the F&O positions.
3. The Stock Exchanges are advised to:
a. put in place the adequate systems and issue the necessary guidelines for implementing the above decision.
b. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.
c. bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminatethe same on the website.
d. communicate to SEBI the status of the implementation of theprovisions of this circular in the Monthly Development Report.
4. This circular is being issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect theinterests of investors in securities and to promote the development of, and toregulate the securities market.