TaxTMI 
TaxTMI 
TaxTMI 
Master Circular on Matters relating to Exchange Traded Derivatives
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....BOARD OF INDIA Table of Contents 1 Index Futures ............................................................................................................. 11 1.1 Product Design ...................................................................................................... 11 1.1.1 Underlying ..................................................................................................... 11 1.1.2 Eligibility Criteria .......................................................................................... 11 1.1.3 Trading Hours ................................................................................................ 11 1.1.4 Size of the Contract ........................................................................................ 11 1.1.5 Quotation........................................................................................................ 11 1.1.6 Tenor of the contract ...................................................................................... 11 1.1.7 Available Contracts ........................................................................................ 11 1.1.8 Settlement Mechanism .............................
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....Exchange, Trading Members, Clearing Corporation/House for Equity Derivatives ....... 25 2 Index Options ............................................................................................................. 27 2.1 Product Design ...................................................................................................... 27 2.1.1 Underlying ..................................................................................................... 27 2.1.2 Eligibility Criteria .......................................................................................... 27 2.1.3 Trading Hours ................................................................................................ 27 2.1.4 Size of the Contract ........................................................................................ 27 2.1.5 Quotation........................................................................................................ 27 2.1.6 Tenor of the contract ...................................................................................... 27 2.1.7 Available Contracts ........................................................................................ 27 ....
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.............................................................................. 33 3.1 Product Design ...................................................................................................... 33 3.1.1 Underlying ..................................................................................................... 33 3.1.2 Eligibility Criteria .......................................................................................... 33 3.1.3 Trading Hours ................................................................................................ 35 3.1.4 Size of the Contract ........................................................................................ 35 3.1.5 Quotation........................................................................................................ 35 3.1.6 Tenor of the contract ...................................................................................... 35 3.1.7 Available Contracts ........................................................................................ 36 3.1.8 Settlement Mechanism ................................................................................... 36 3.1.9 Settlement Price....
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................................................................ 44 4.1 Product Design ...................................................................................................... 44 4.1.1 Underlying ..................................................................................................... 44 4.1.2 Eligibility Criteria .......................................................................................... 44 4.1.3 Trading Hours ................................................................................................ 44 4.1.4 Size of the Contract ........................................................................................ 44 4.1.5 Quotation........................................................................................................ 44 4.1.6 Tenor of the contract ...................................................................................... 44 4.1.7 Available Contracts ........................................................................................ 44 4.1.8 Settlement Mechanism ................................................................................... 44 4.1.9 Settlement Price .................
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............................................... 49 5.1.1 Underlying ..................................................................................................... 49 5.1.2 Trading Hours ................................................................................................ 49 5.1.3 Size of the contract ......................................................................................... 49 5.1.4 Quotation........................................................................................................ 49 5.1.5 Tenor of the contract ...................................................................................... 49 5.1.6 Available contracts ......................................................................................... 49 5.1.7 Settlement mechanism ................................................................................... 49 5.1.8 Settlement price ............................................................................................. 49 5.1.9 Final settlement day ....................................................................................... 49 5.1.10 Participants ...........................................
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....................................................................... 60 5.4.3 Eligibility criteria for members in the currency futures segment .................. 61 5.4.4 Regulatory and legal aspects .......................................................................... 62 6 Currency options ........................................................................................................ 63 6.1 Product Design ...................................................................................................... 63 6.1.1 Underlying ..................................................................................................... 63 6.1.2 Trading Hours ................................................................................................ 63 6.1.3 Size of the contract ......................................................................................... 63 6.1.4 Quotation........................................................................................................ 63 6.1.5 Tenor of the contract ...................................................................................... 63 6.1.6 Available contracts ...........................
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........................................... 66 6.3.2 Position limits ................................................................................................ 66 6.3.3 Surveillance system ....................................................................................... 67 6.4 Eligibility Criteria of the Segment, Exchanges and Trading Members ................ 67 6.4.1 Eligibility criteria of currency options segment ............................................. 67 6.4.2 Eligibility criteria for the Clearing Corporation of the currency options segment 67 6.4.3 Eligibility criteria for members in the currency futures segment .................. 67 6.4.4 Regulatory and legal aspects .......................................................................... 67 7 Interest Rate Futures on 10-Year GoI Security ...................................................... 68 7.1 Product Design, Margins and Position Limits ...................................................... 68 7.1.1 Underlying ..................................................................................................... 68 7.1.2 Coupon ................................................................
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.... Management Measures ................................................................................. 76 7.2.1 Introduction .................................................................................................... 76 7.2.2 Portfolio Based Margining ............................................................................. 76 7.2.3 Real-Time Computation ................................................................................. 76 7.2.4 Liquid Networth ............................................................................................. 76 7.2.5 Liquid Assets ................................................................................................. 76 7.2.6 Mark-to-Market (MTM) Settlement .............................................................. 76 7.2.7 Margin Collection and Enforcement .............................................................. 77 7.2.8 Safeguarding Client's Money ........................................................................ 77 7.2.9 Periodic Risk Evaluation Report .................................................................... 77 7.3 Regulatory and Legal aspects ...........................
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..........................83 8.1.11 Final Contract Settlement value ................................................................... 83 8.1.12 Initial margin .................................................................................................. 83 8.1.13 Extreme Loss margin ..................................................................................... 83 8.1.14 Calendar spread margin ................................................................................. 83 8.1.15 Formula for determining standard deviation .................................................. 83 8.1.16 Position limits ................................................................................................ 85 8.2 Regulatory and Legal aspects ................................................................................ 85 8.2.1 Exchange ........................................................................................................ 85 9 Interest Rate Futures on 2 Year Notional Coupon Bearing Government of India (GoI) Security ..................................................................................................................... 86 9.1 Product....
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............................................................ 92 10 Interest Rate Futures on 5 Year Notional Coupon Bearing Government of India (GoI) Security ............................. 93 10.1 Product Design, Margins and Position Limits ................................................... 93 10.1.1 Underlying ..................................................................................................... 93 10.1.2 Trading hours ................................................................................................. 93 10.1.3 Size of the contract ......................................................................................... 93 10.1.4 Quotation........................................................................................................ 93 10.1.5 Tenor of the contract ...................................................................................... 93 10.1.6 Contract months ............................................................................................. 93 10.1.7 Settlement mechanism ................................................................................... 93 10.1.8 Contract Value ............................
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....mpliance ............................................................................................ 101 11.9 Enforcement..................................................................................................... 102 11.10 Trading............................................................................................................. 102 12 Miscellaneous............................................................................................................ 103 12.1 Corporate Action Adjustments: ....................................................................... 103 12.2 Reporting and Disclosure ................................................................................ 106 12.2.1 Monthly Activity Report .............................................................................. 106 12.2.2 Reporting of derivative transactions to the media and the newspapers ....... 106 12.3 Straight through Processing ............................................................................. 106 12.4 Certification ..................................................................................................... 110 12.5 Introduction of Volatility and....
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....he index shall have a weightage of more than 5% in the index. The index on which futures and options contracts are permitted shall be required to comply with the eligibility criteria on a continuous basis. The Exchange shall check whether the index continues to meet the aforesaid eligibility criteria on a monthly basis. If the index fails to meet the eligibility criteria for three consecutive months, then no fresh contract shall be issued on that index. However, the existing unexpired contracts shall be permitted to trade till expiry and new strikes may also be introduced in the existing contracts. 1.1.3 Trading Hours The trading hours for index futures would be decided from time to time by the exchange subject to the condition that the trading hours are between 9 AM and 5 PM, and the exchange has in place risk management system and infrastructure commensurate to the trading hours. 1.1.4 Size of the Contract A derivative contract shall have a value of not less than Rs. 2 Lakhs at the time of its introduction in the market. 1.1.5 Quotation The index futures contract shall be quoted in rupee terms. 1.1.6 Tenor of the contract The index futures contract shall have a maximu....
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.... Futures shall not exceed 33 1/3 (thirty three one by three) times the liquid net worth of a member. Exposure limits are in addition to the initial margin requirements. A numerical example of computation of capital adequacy, exposure limits and initial margin requirements is given below; 1. Beginning of day one Suppose that the position at the beginning of day one is as follows: Member's Liquid Assets Cash equivalent deposits 35,00,000 Securities deposits (net of haircuts) 40,00,000 Member's Open Position 200 contracts long in the 3 month contract Futures Prices 3 month contracts is Rs. 1,00,000 1 month contract is Rs. 98,000 Initial Margin 5% Days to expiry Fifth day before expiry of one month contract The margin and capital adequacy calculations will be as follows: Initial margin = 5% * 200 * 1,00,000 = 10,00,000 Total open position = 2,00,00,000 Total liquid assets will be treated as 70,00,000 only since at least 50% of total liquid assets must be in cash equivalents (see Para 4(v)). Liquid net worth = 70,00,000 - 10,00,000 = 60,00,0000 Both conditions of networth and exposure limit are satisfied as shown below: Condition 1. 60,00,000 > 50,00,000 Condition 2....
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....ore than 5% of the trade guarantee fund or 1% of the total liquid assets deposited with the clearing house, whichever is lower, shall be exposed to any single bank which is not rated P1 (or P1+) or equivalent, by a RBI recognised credit rating agency or by a reputed foreign credit rating agency, and not more than 50% of the trade guarantee fund or 10% of the total liquid assets deposited with the clearing house, whichever is lower, shall be exposed to all such banks put together. c. The exposure limits and any changes thereto shall be promptly communicated to SEBI. The clearing corporation shall also periodically disclose to SEBI its actual exposure to various banks. 1.2.3 Securities Equity securities classified under Group I in the underlying cash market may be accepted towards liquid assets in the derivative markets. Securities classified under Group I shall be those as defined by SEBI from time to time. The equity securities shall be valued/marked to market on a daily basis after applying a haircut equivalent to the respective VaR of the equity security. The list of acceptable equity securities shall be updated on the basis of trading and mean impact cost on the 15th of eac....
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....ed by SEBI and RBI with regard to the acceptance of various collaterals shall be adhered to Clearing members are permitted to accept foreign sovereign securities with 'AAA' rating, (hereinafter referred to as "sovereign securities") as collateral from FII client with the following necessary safeguards: i. Before accepting sovereign securities as collateral from FII, the clearing member shall enter into a written agreement with the FII and also with the clearing corporation, containing, inter alia, the following terms: a.In the event of any dispute regarding liquidation or return of the sovereign securities tendered as collateral, or any other incidental matter, the courts in India will have jurisdiction to decide such disputes. Alternatively, the agreement may contain an arbitration clause. b.The agreement shall also contain the right of the clearing corporation as well as the clearing member to liquidate the sovereign securities tendered as collateral, in the event of default by clearing member or FII, as the case may be. ii. The clearing member shall take due care to ensure that the sovereign securities tendered as collateral are available for liquidation in the event o....
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....total liquid assets of the clearing member. iv. The bonds shall have a fixed percentage based or VaR based haircut. A higher haircut may be considered to cover the expected time frame for liquidation. To begin with the haircut shall be a minimum of 10%. 1.2.4 Initial Margin Computation The Initial Margin requirements are based on worst scenario loss of a portfolio of an individual client to cover 99% VaR over one day horizon across various scenarios of price changes and volatility shifts. For Index products, the price scan range is specified at three standard deviation (3 sigma) and the volatility scan range is specified at 4%. The Exponential Weighted Moving Average method (EWMA) shall be used to obtain the volatility estimate every day. For Index products the price scan range is specified at three standard deviation (3 sigma) and the volatility scan range is specified at 4%. The estimate at the end of day t (σt) is estimated using the previous volatility estimate, i.e., as at the end of t-1 day (t-1), and the return (rt) observed in the futures market during day t. The formula shall be as under: where λ is a parameter which determines how rapidly volatility e....
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....can compute what the margin would be for any given closing level of the index. Further, the trading software itself should provide this information on a real time basis on the trading workstation screen. There is also a minimum margin requirement. For index futures contracts it is specified that in no case the initial margin shall be less than 5% of the value of the contract. 1.2.5 Margins for Calendar Spreads A calendar spread is a situation in which a position at one maturity is hedged by an offsetting position at a different maturity on the same underlying, e.g., a short position in six months contract hedged by a long position in nine month contract. The margin on calendar spreads shall be at a flat rate of 0.5% per month of spread on the far month contract subject to a minimum margin of 1% and a maximum margin of 3% on the far side of the spread. 1.2.6 Exposure Limits It has been prescribed that the notional value of gross open positions at any point in time in the case of Index Futures shall not exceed 33 1/3 (thirty three one by three) times the liquid net worth of a member. Therefore, the exchanges would be required to ensure that 3% of the notional value of gross open....
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....in turn, shall pass on the benefit to the client. For institutional investors, however, the cross margining benefit shall be provided after confirmation of trades. To avail the facility of cross margining, a client may maintain two accounts with the trading member/clearing member, namely arbitrage account and a non-arbitrage account, to allow converting partially replicated portfolio into a fully replicated portfolio by taking opposite positions in two accounts. However, for the purpose of compliance and reporting requirements, the positions across both accounts shall be taken together and client shall continue to have unique client code. A client may settle through a trading member/clearing member/custodian, as the case may be, who is clearing in both the segments or through two trading members/clearing members/custodians, one of whom is a trading member/custodian in the cash segment and the other is a clearing member in the derivatives segment. However, in course of time, a client will settle through only one clearing member who is a member in both the segments. In the event of default by a trading member/clearing member/custodian, as the case may be, whose clients have availe....
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....y proposal for changes in the methodology to compute the initial margin should be filed with SEBI and released to the public for comments along with detailed comparative back testing results of the proposed methodology and the current methodology. The proposal shall specify the date from which the new methodology will become effective and this effective date shall not be less than three months after the date of filing with SEBI. At any time, up to two weeks before the effective date, SEBI may instruct the derivatives exchange and clearing corporation/house not to implement the change, or the derivatives exchange and clearing corporation/ house may on its own decide not to implement the change. The derivatives exchange/segment of the exchange/clearing corporation/clearing house of the exchange may choose to impose more stringent requirements, other than those prescribed above. 1.3 Surveillance and Disclosures 1.3.1 Unique client code The Exchange shall ensure that each client is assigned a client code which is unique across all members. The unique client code shall be assigned with the use of PAN number. 1.3.2 Position Limits 1.3.2.1 Market Level There are no market wide pos....
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....tion. b. A unique code would be assigned by the exchanges and / or the Clearing House/Clearing Corporation to each registered FII intending to trade in derivative contracts. c. The FII would be required to confirm all its positions and the positions of all its sub-accounts to the designated Clearing Members online but before the end of each trading day. d. The designated Clearing Member/s would at the end of each trading day submit the details of all the confirmed FII trades to the derivative Segment of the exchange and their Clearing House / Clearing Corporation. e. The exchanges and their Clearing House / Clearing Corporation would then compute the total FII trading exposure and would monitor the position limits at the end of each trading day. The cumulative FII position may be disclosed to the market on a T + 1 basis, before the commencement of trading on the next day. f. In the event of an FII breaching the position limits on any derivative contract on an underlying, the FII would not be permitted by the exchanges and their Clearing House / Clearing Corporation / Clearing Member/s to take any fresh positions in any derivative contracts in that underlying. However, the....
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....online surveillance system should be so designed that indications of material aberrations from normal activity are automatically generated and thrown up by the system. b. The parameters which need to be monitored either through the online system or otherwise should inter-alia include the following parameters as suggested by the Advisory Committee on Derivatives: I. Monitoring of open interest, cost of carry/impact cost and volatility. II. Monitoring of closing prices. III. The open positions in the derivative market should be seen in conjunction with the open positions in the cash market. i.e the position deltas should be monitored. IV. The timing of disclosure by corporates should be monitored as this could influence the prices of the contract at the time of introduction and expiry. V. Strike prices with large open positions should be monitored as this could influence the prices of the contract at the time of introduction and expiry. VI. Strike prices with large open positions should be monitored, as such strike prices could be a target price to be achieved in the cash market to derive maximum benefit from the derivative position. c. The surveillance systems and pr....
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....n gathered by the risk management departments/clearing corporations while enforcing the risk management measures and settlement processes are critical inputs. Such information could include pattern of defaults related to specific scrips/contracts and special risk management measures taken keeping in view the market conditions. i. The exchanges should call for information from brokers in a standard form, and preferably in electronic form, to facilitate faster analysis as well as building up of databases. It may also be ensured that duly authenticated information is submitted by the broker or his designated agent. j. While implementing a stock watch type of system for derivatives, the system should be designed to provide online access to relevant historical data on derivatives trading for at least a year. k. The underlying securities in the derivatives market may be listed on more than one exchange and brokers dealing in such securities/derivatives may have membership in more than one exchange. In the interest of better surveillance, it is therefore necessary that relevant information obtained through surveillance at one exchange should be shared with other exchanges. Exchanges....
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....ities c) Member's card d) Non-allowable securities (unlisted securities) e) Bad deliveries f) Doubtful debts and advances* g) Prepaid expenses, losses h) Intangible assets i) 30% of marketable securities * Explanation - Includes debts/ advances overdue for more than three months or given to associates. The trading members shall be required to have qualified approved user and sales person who have passed a Certification Programme approved by SEBI. The Dr. L.C Gupta Committee on Derivatives had permitted existing stock exchanges having cash trading to trade in derivative contracts through a separate segment with separate membership. The derivative segment of an exchange and its Clearing House/Corporation shall be separate from the cash segment in the following areas - a. The legal framework governing trading, clearing and settlement of the derivative segment should be separate from the cash market segment. In other words, the Regulations and / or Bye-laws of derivative segment, as the case may be for specific exchanges, shall be separate from the cash market. b. Trade Guarantee Fund (TGF)/Settlement Guarantee Fund (SGF) of the derivative segment shall be separate from ....
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....hat for index future contracts as specified in Section 1.1.8. Initially, the Exchanges shall introduce premium style index options. 2.1.9 Settlement Price Same as that for index future contracts as specified in Section 1.1.9. 2.1.10 Final Settlement Day Same as that for index future contracts as specified in Section 1.1.10. 2.1.11 Application The Derivative Exchange/Segment shall submit their proposal for approval of the index option contract to SEBI which shall include: g. the details of proposed derivative contract to be traded on the exchange which would include: i. Symbol ii. Underlying iii. Multiplier iv. Strike Price Intervals v. Premium Quotation vi. Last Trading Day vii. Expiration day/month viii. Exercise Style ix. Settlement of Option Exercise x. Position and Exercise Limits xi. Margin xii. Trading Hours h. the economic purpose it is intended to serve, i. likely contribution to market development, j. the safeguards and the risk protection mechanism adopted by the exchange to ensure market integrity, protection of investors and smooth and orderly trading, k. the infrastructure of the exchange and the surveillance system to effective....
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....Option Pricing Models - Black-Scholes, Binomial, Merton, Adesi-Whaley. The maximum loss under any of the scenario (considering only 35% of the loss in case of scenarios 15 and 16) is referred to in this circular as the Worst Scenario Loss. Subject to the additions and adjustments mentioned below, the Worst Scenario Loss is the margin requirement for the portfolio. 2. Real Time Computation The computation of Worst Scenario Loss has two components. The first is the valuation of each option contract under sixteen scenarios using an appropriate option pricing model. The second is the application of these Scenario Contract Values to the actual positions in a portfolio to compute the portfolio values and the Worst Scenario Loss. For computational ease, exchanges are permitted to update the Scenario Contract Values only at discrete time points each day. However, the latest available Scenario Contract Values would be applied to member/client portfolios on a real time basis. 3. Calendar Spread The margin for calendar spread would be the same as specified for the index futures contracts. However, the margin shall be calculated on the basis of delta of the portfolio in each month. Thus....
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....Section 1.2.6. 2.2.8 Bank Guarantees: Same as that for index future contracts as specified in Section 1.2.7. 2.2.9 Securities Same as that for index future contracts as specified in Section 1.2.8. 2.2.10 Reporting and Disclosure: Same as that for index future contracts as specified in Section 1.2.9. 2.3 Surveillance and Disclosures 2.3.1 Unique client code Same as that for index future contracts as specified in Section 1.3.1. 2.3.2 Position Limits 2.3.2.1 Market Level There are no market wide position limits specified for index option contracts. 2.3.2.2 Customer Level/ NRI/Sub Accounts Same as that for index future contracts as specified in Section 1.3.2.2. 2.3.2.3 Trading Member/FII/Mutual Fund Same as that for index future contracts as specified in Section 1.3.2.2. This limit would be applicable on open positions in all option contracts on a particular underlying index. 2.3.3 Monitoring of Position Limits 2.3.3.1 NRI Same as that for index future contracts as specified in section 1.3.3.1. 2.3.3.2 FII /Sub Accounts Same as that for index future contracts as specified in section 1.3.3.2. 2.3.3.3 Mutual Funds Same as that for index future contract....
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....he manner specified by Prof. J.R Varma Committee on risk containment measures for Index Futures. The daily closing volatility estimate value shall be applied to the day's order book snapshots to compute quarter sigma order size. c. The quarter sigma percentage shall be applied to the average of the best bid and offer price in the order book snapshot to compute the order size to move price of the stock by quarter sigma. a. The median order size to cause quarter sigma price movement shall be determined separately for the buy side and the sell side. The average of the median order size for the buy and the sell side shall be taken as the median quarter sigma order size. The details of calculation methodology and relevant data shall be made available to the public at large on the website of the exchange. The quarter sigma order size in a stock shall be calculated on the 15th of each month, on a rolling basis, considering the order book snapshots in the previous six months. Similarly, the average daily market capitalization and the average daily traded value shall also be computed on the 15th of each month, on a rolling basis, to arrive at the list of top 500 stocks. The num....
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.... in the market. The lot sizes for stock derivative contracts have been standardized as given under: Price Bands (Rs.) Contract Size Lot Size/ Multiplier Value (in Rs. lakh) 1,601 and above 125 Greater than 2 lakhs 801 to 1600 250 Between 2 lakhs and 4 lakhs 401 to 800 500 201 to 400 1,000 101 to 200 2,000 51 to 100 4,000 25 to 50 8,000 Less than 25 A multiple of 1000 Explanation: The lot size for an underlying with a price of Rs. 250, i.e., in the price band of Rs. 201-400, shall be 1000 units. The Stock Exchanges shall review the lot size once in every 6 months based on the average of the closing price of the underlying for last one month and wherever warranted, revise the lot size by giving an advance notice of at least 2 weeks to the market. If the revised lot size is higher than the existing one, it will be effective for only new contracts. In case of corporate action, the revision in lot size of existing contracts shall be carried out as given in the Chapter 8. The Stock Exchanges shall ensure that the lot size is same for an underlying traded across Exchanges. 3.1.5 Quotation Same as that for index future contracts as specified in section 1.....
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.... in section 1.1.9. 3.1.10 Final Settlement Day Same as that for index future contracts as specified in section 1.1.10. 3.1.11 Application The Derivative Exchange/Segment shall submit their proposal for approval of the Single Stock Futures Contracts to SEBI which shall include: a. the details of proposed derivative contract to be traded on the exchange which would include: 1. Symbol 2. Underlying 3. Multiplier 4. Last Trading Day 5. Margins 6. Methodology for calculating closing price for mark to market settlement. 7. Methodology for calculating closing price at time of expiry 8. Trading Hours b. the economic purpose it is intended to serve, c. likely contribution to market development, d. the safeguards and the risk protection mechanism adopted by the exchange to ensure market integrity, protection of investors and smooth and orderly trading, e. the infrastructure of the exchange and the surveillance system to effectively monitor trading in Single Stock Futures contracts, f. details of settlement procedures & systems with regard to Single Stock Futures. 3.2 Risk Management 3.2.1 Initial margin or worst scenario loss The Initial Margin requi....
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.... to ensure that higher of 5% or 1.5 (standard deviation) of the notional value of gross open position in Single Stock Futures contracts is collected /adjusted from the liquid net worth of a member on a real time basis. Exposure limits are in addition to the initial margin requirements. For the purpose of computing 1.5 standard deviations, the standard deviation of daily logarithmic returns of prices in the underlying stock in the cash market in the last six months shall be computed. This value shall be applicable for a month and shall be re-calculated at the end of the month by once again taking the price data on a rolling basis for the past six months. 3.2.4 Real Time Computation The computation of Worst Scenario Loss has two components. The first is the valuation of the portfolio under sixteen scenarios. At the second stage, these Scenario Contract Values are applied to the actual portfolio positions to compute the portfolio values and the initial margin (Worst Scenario Loss). For computational ease, exchanges are permitted to update the Scenario Contract Values only at discrete time points each day and the latest available Scenario Contract Values would is applied to member/cl....
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....ee days from the 15th of each month. 3.2.5 Cross Margining Same as that for index future contracts as specified in section 1.2.9. 3.2.6 Margin Collection and Enforcement Same as that for index future contracts as specified in section 1.2.10. It is clarified that for stocks which have a mean value of impact cost greater than 1%, in addition to the price scanning range, the minimum initial margin for single stock futures contracts shall also be scaled up by square root of three. In the absence of trading in the last half an hour the theoretical price would be taken for the collection of MTM margin. The Derivative Exchanges/Segment shall define the methodology of calculating the 'theoretical price' at the time of making an application for approval of the stock futures contract to SEBI and methodology for calculating the 'theoretical price' would also be disclosed to the market. In addition, the exchange shall also specify the methodology for arriving at the closing price at the time of expiry. 3.2.7 Liquid Net Worth and Exposure Limits of a Clearing Member Same as that for index future contracts as specified in section 1.2.1. 3.2.8 Liquid Assets: Same as that for index ....
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....view to operationalise implementation of monitoring of Market Wide Position Limits across Exchanges, the following procedure shall be followed: At the latest on the Trading Day Activity 6.30 PM Each Exchange to disseminate on web the following for every security: a. ISIN of the security, b. Name and symbol of the security, c. MWPL (in terms of no. of shares) of the security, and d. Open Interest (in terms of no. of shares) of the security. 7.00 PM Each Exchange to disseminate on web the following for every security, after aggregating across Exchanges: a. ISIN of the security, b. Name and symbol of the security, c. MWPL (in terms of no. of shares) of the security, d. Open Interest (in terms of no. of shares) of the security, and e. Permissible limits for next day in terms of SEBI Circular SEBI/DNPD/Cir-26/2004/07/16 dated July 16, 2004. 7.15 PM Each Exchange to report any discrepancy in the above data to other Exchanges and after correction, disseminate the final data on the web. The above data shall be in a machine readable, open format (preferably XML format). Further, the Exchange shall check on a monthly basis, whether a stock has remained subject to the ban on new pos....
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....Tenor of the contract Same as that for stock future contracts as specified in 3.1.6. 4.1.7 Available Contracts Same as that for stock future contracts as specified in 3.1.7. Each maturity shall have minimum of three strikes (in the money, at the money and out of the money) 4.1.8 Settlement Mechanism Same as that for index future contracts as specified in 1.1.8. The Exchanges shall introduce Premium Settled American / European Style Stock Options. 4.1.9 Settlement Price Same as that for index future contracts as specified in 1.1.9. 4.1.10 Final Settlement Day Same as that for index future contracts as specified in 1.1.10. 4.1.11 Application The Derivative Exchange/Segment shall submit their proposal for approval of the stock option contract to SEBI which shall include: a. the details of proposed derivative contract to be traded on the exchange which would include: 1. Symbol 2. Underlying - giving details of the calculations mentioned above and ensuring that the stock fulfills the eligibility criterion specified. 3. Lot Size / Multiplier 4. Strike Price Intervals 5. Premium Quotation 6. Last Trading Day 7. Expiration day/month 8. Exercise Style 9.....
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....re contracts as specified in section 1.2.10. It is clarified that for stocks which have a mean value of impact cost greater than 1%, in addition to the price scanning range, the short option minimum charge for stock option contracts shall also be scaled up by square root of three. 4.2.6 Liquid Net Worth and Exposure Limits of a Clearing Member Same as that for index future contracts as specified in section 1.2.1. 4.2.7 Liquid Assets: Same as that for index future contracts as specified in section 1.2.2. 4.2.8 Bank Guarantees: Same as that for index future contracts as specified in section 1.2.3. 4.2.9 Securities Same as that for index future contracts as specified in section 1.2.4. 4.2.10 Reporting and Disclosure: Same as that for index future contracts as specified in section 1.2.11. 4.3 Surveillance and Disclosures 4.3.1 Unique client code Same as that for index future contracts as specified in Section 1.3.1. 4.3.2 Position Limits 4.3.2.1 Market Level Same as that for stock future contracts as specified in 3.3.2.1. 4.3.2.2 Customer Level/ NRI/Sub Accounts Same as that for stock future contracts as specified in 3.3.2.2. 4.3.2.3 Trading Member/FII/Mutual....
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....l be two working days prior to the final settlement day. The currency futures contract would expire on the last working day (excluding Saturdays) of the month. The last working day would be taken to be the same as that for Interbank Settlements in Mumbai. The rules for Interbank Settlements, including those for 'known holidays' and 'subsequently declared holiday' would be those as laid down by FEDAI. 5.1.10 Participants To begin with, FIIs and NRIs would not be permitted to participate in currency futures market. To enable Banks to become Clearing Member and/or Trading Member of the Currency Derivatives Segment of an Exchange, an Exchange shall amend its bye-laws, as under: "Any bank, -included in the Second Schedule to the Reserve Bank of India Act, 1934, and specifically authorized by RBI for this purpose, a. is eligible to become Clearing Member and/or Trading Member of the Currency Derivatives Segment of an Exchange, on the recommendation of the governing body of the Exchange. b. such bank can act as member for their proprietary dealings, to act on their own account, in the Currency Derivatives Segment of the Exchange. c. such bank can also act as member or an agent fo....
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....ethodology was found to work well at 1 % risk level only at 3.5 sigma levels. Given the computational ease of the EWMA model and given the familiarity of the Exchanges with this particular model (it is currently being used in the equity derivatives market), the Committee, after considering the various aspects of the different models, recommends the following:- The exponential moving average method would be used to obtain the volatility estimate every day. The estimate at the end of time period t (σt) is estimated using the volatility estimate at the end of the previous time period. i.e. as at the end of t-1 time period (σt-1), and the return (rt) observed in the futures market during the time period t. The formula would be as under: (σt)2 = λ (σt-1)2 + (1 - λ ) (rt)2 where λ is a parameter which determines how rapidly volatility estimates changes. The value of λ is fixed at 0.94. i. σ (sigma) means the standard deviation of daily returns in the currency futures market. ii. The "return" is defined as the logarithmic return: rt = ln(Ct/Ct-1) where Ct is the Currency futures price at time t. The plus/minus 3.5 sigma l....
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....for a spread of 1 month; Rs. 500 for a spread of 2 months, Rs. 800 for a spread of 3 months and Rs. 1000 for a spread or 4 months or more for the US Dollar - Indian Rupee (US$-INR) contract; the calendar spread margin shall be at a value of Rs. 700 for a spread of 1 month; Rs. 1000 for a spread of 2 months and Rs. 1500 for a spread of 3 months or more for the Euro- Indian Rupee (EUR-INR) contract; the calendar spread margin shall be at a value of Rs. 1500 for a spread of 1 month; Rs. 1800 for a spread of 2 months and Rs. 2000 for a spread of 3 months or more for the Pound Sterling - Indian Rupee (GBP-INR) contract; the calendar spread margin shall be at a value of Rs. 600 for a spread of 1 month; Rs. 1000 for a spread of 2 months and Rs. 1500 for a spread of 3 months or more for the Japanese Yen - Indian Rupee (JPY-INR) contract. The benefit for a calendar spread would continue till expiry of the near month contract. For a calendar spread position, the extreme loss margin shall be charged on one third of the mark to market value of the far month contract. 5.2.6 Extreme Loss margin Extreme loss margin of 1% for the US Dollar - Indian Rupee (US$-INR) contract, 0.3% for the Euro-Ind....
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....rgin collection from clients. 5.2.11 Safeguarding client's money The Clearing Corporation should segregate the margins deposited by the Clearing Members for trades on their own account from the margins deposited with it on client account. The margins deposited on client account shall not be utilized for fulfilling the dues which a Clearing Member may owe the Clearing Corporation in respect of trades on the member's own account. The client's money is to be held in trust for client purpose only. The following process is to be adopted for segregating the client's money vis-à-vis the clearing member's money: i At the time of opening a position, the member should indicate whether it is a client or proprietary position. ii Margins across the various clients of a member should be collected on a gross basis and should not be netted off. iii When a position is closed, the member should indicate whether it was a client or his own position which is being closed. iv In the case of default, the margins paid on the proprietary position would only be used by the Clearing Corporation for realising its dues from the member. 5.2.12 Periodic risk evaluation report The Clearing Corp....
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..... The above monitoring should be for both client level positions (based on the unique client code) and for trading member level positions. c. The exchange shall treat violation of position limits as an input for further surveillance action. Upon detecting large open positions, the exchange shall conduct detailed analysis based on the overall nature of positions, the trading strategy, positions in the underlying market, the positions of related entities (concept of persons acting in concert would be applied), etc. d. The violators of position limits shall be accountable for their large positions and should submit detailed information pertaining to their trading activities whenever the information is sought by the exchange. The clearing member would be accountable for positions of all trading members and clients of trading members clearing through him. Similarly, the trading member would be accountable for the positions of his clients. The exchange may also call for information directly from the client itself. The following position limits would be applicable in the currency futures market: US Dollar - Indian Rupee (US$-INR) Contract Client Level: The gross open positio....
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.... the total open interest or GBP 25 million whichever is higher. However, the gross open position of a Trading Member, which is a bank, across all contracts, shall not exceed 15% of the total open interest or GBP 50 million, whichever is higher. Clearing Member Level: No separate position limit is prescribed at the level of clearing member. However, the clearing member shall ensure that his own trading position and the positions of each trading member clearing through him is within the limits specified above. Japanese Yen - Indian Rupee (JPY-INR) Contract Client Level: The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or JPY 200 million whichever is higher. The Exchange will disseminate alerts whenever the gross open position of the client exceeds 3% of the total open interest at the end of the previous day's trade. Trading Member Level: The gross open positions of the trading member across all contracts shall not exceed 15% of the total open interest or JPY 1000 million whichever is higher. However, the gross open position of a Trading Member, which is a bank, across all contracts, shall not exceed 15% of the total open ....
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....llance, it is necessary that relevant information obtained through surveillance at one exchange should be shared with other exchanges. Exchanges are, therefore, advised to share information on positions in currency futures and any extraordinary movement in price / volume or concentration periodically or upon specific request by any stock exchange. The Clearing Corporations of the various eligible exchanges must meet periodically, say once a week, to discuss market integrity and other surveillance issues. h. Exchanges should study surveillance practices in various Global Forex Derivative Markets. Surveillance practices in commodities and bullion markets could also be studied where appropriate. Case studies on some market manipulations in various derivatives markets could be looked at to see what lessons could be drawn. Periodical benchmarking, at least once in every six months, against international practices, systems performance etc., must be performed and documented. The reporting of currency derivative transactions to the media and the newspapers should be in a uniform format. Accordingly, the Currency Derivative Exchanges/ Segments and their Clearing Corporations may be asked....
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...., handling investor complaints and preventing irregularities in trading. A recognized stock exchange where other securities are also being traded may set up a separate currency futures segment in the following manner: a. The trading and the order driven platform of currency futures should be separate from the trading platforms of the other segments. b. The membership of the currency futures segment should be separate from the membership of the other segments. c. The currency futures segment should have a separate Governing Council on which the representation of Trading/Clearing Members of the currency futures segment should not exceed 25%. Further, 50% of the public representatives on the Governing Council of the currency futures segment can be common with the Governing Council of the cash/equity derivatives segments of the Exchange. d. The Chairman of the Governing Council of the currency futures segment shall be a member of the Governing Council. If the Chairman is a Trading Member/Clearing Member, then he shall not carry on any trading/clearing business on any Exchange during his tenure as Chairman. e. No trading/clearing member should be allowed simultaneously to be ....
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.... members in the currency futures segment The membership of the currency futures segment shall be separate from the membership of the equity derivative segment or the cash segment of a recognized stock exchange. The trading member will be subject to a balance sheet net worth requirement of Rs. 1 crore while the clearing member would be subject to a balance sheet net worth requirement of Rs. 10 crores. Self clearing member shall have a minimum net worth of Rs. 5 crore. The definition of balance sheet net worth would be the same as that in the equity derivatives market. The clearing member would also be subject to a liquid net worth requirement of Rs. 50 lakhs as detailed above. The trading members and sales persons in the currency futures market must have passed a certification programme which is considered adequate by SEBI. The approved users and sales personnel of the trading member should have passed the certification programme. This requirement shall not be applicable in respect of a trading member in the currency derivatives segment, which is a bank, for a period of one year from August 06, 2008. 5.4.4 Regulatory and legal aspects Before the start of the currency futures seg....
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....the cycle March/June/September/December. Minimum of three in-the-money, three out-of the-money and one near-the-money strikes would be provided for all available contracts. 6.1.7 Settlement mechanism Same as that for currency future contracts as specified in Section 5.1.7. 6.1.8 Settlement price Same as that for currency future contracts as specified in Section 5.1.8. 6.1.9 Final settlement day Same as that for currency future contracts as specified in Section 5.1.9. 6.1.10 Participants Same as that for currency future contracts as specified in Section 5.1.10. 6.1.11 Exercise at Expiry On expiry date, all open long in-the-money contracts, on a particular strike of a series, at the close of trading hours would be automatically exercised at the final settlement price and assigned on a random basis to the open short positions of the same strike and series. 6.2 Risk Management Measures In exchange traded derivative contracts, the Clearing Corporation acts as a central counterparty to all trades and performs full novation. The risk to the clearing corporation can only be taken care of through a stringent margining framework. Also, since derivatives are leveraged instr....
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....t of a client. 6.2.3 Real time computation Same as that for currency future contracts as specified in Section 5.2.4. 6.2.4 Calendar spread margins A long currency option position at one maturity and a short option position at a different maturity in the same series, both having the same strike price would be treated as a calendar spread. The margin for options calendar spread would be the same as specified for USD-INR currency futures calendar spread. The margin would be calculated on the basis of delta of the portfolio in each month. A portfolio consisting of a near month option with a delta of 100 and a far month option with a delta of -100 would bear a spread charge equal to the spread charge for a portfolio which is long 100 near month currency futures and short 100 far month currency futures. Portfolio would mean portfolio consisting of futures and /or options contract on a particular underlying. Option positions of different expiry, irrespective of their strike prices, shall also attract calendar spread margin. 6.2.5 Settlement of Premium Premium would be paid in by the buyer in cash and paid out to the seller in cash on T+1 day. Until the buyer pays in the premium, t....
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....) shall not exceed 15% of the total open interest or USD 100 million whichever is lower. Clearing Member Level: No separate position limit is prescribed at the level of clearing member. However, the clearing member shall ensure that his own trading position and the positions of each trading member clearing through him is within the limits specified above. 6.3.3 Surveillance system Same as that for currency future contracts as specified in Section 5.3.3 and 5.3.4. 6.4 Eligibility Criteria of the Segment, Exchanges and Trading Members 6.4.1 Eligibility criteria of currency options segment Same as that for currency future contracts as specified in Section 5.4.1. 6.4.2 Eligibility criteria for the Clearing Corporation of the currency options segment Same as that for currency future contracts as specified in Section 5.4.2. 6.4.3 Eligibility criteria for members in the currency futures segment Same as that for currency future contracts as specified in Section 5.4.3. 6.4.4 Regulatory and legal aspects Same as that for currency future contracts as specified in Section 5.4.4. A SEBI-RBI constituted committee would meet periodically to sort out issues, if any, arising out of ov....
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....prices of all the securities in the delivery basket chosen by the Exchange. The theoretical futures price of each security is the weighted average cash price of outright trades of that security during the day on the NDS Order Matching platform, adjusted for cost of carry, subject to at least 5 trades for Rs. 10 crore. If there are not enough trades as required above or there is a material market event during the trading hours, the theoretical futures price of each security shall be the FIMMDA / PDAI / Bloomberg revaluation price(s) (published on the FIMMDA website on a daily basis: URL http://www.fimmda.org/default.asp?access=na), adjusted for cost of carry. The cost of carry shall be computed for the period upto the last business day of the delivery month. If, however, the near quarter contract is liquid (5 trades for Rs. 10 crore during the last 30 minutes, 60 minutes or 120 minutes, as the case may be), the VWAP of the near quarter contract shall be adjusted for cost of carry to arrive at the theoretical price for subsequent quarter contracts. Further, if near quarter contract is illiquid while the next quarter contract is liquid, then the VWAP of the nearest liquid quarter con....
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....rst coupon shall be assumed to be paid after 6 months. If, after rounding, the deliverable security does not last for an exact number of 6-month periods (i.e. there are an extra 3 months), the first coupon would be assumed to be paid after 3 months and accrued interest would be subtracted. 7.1.13 Invoice Price Invoice Price of the respective deliverable grade security would be the futures settlement price times a conversion factor plus accrued interest. 7.1.14 Delivery Schedule and Delivery Process/Mechanism Buyer and seller in Interest rate Futures on 10-year Notional Coupon bearing GoI security shall take and give securities respectively in the demat or PDO mode. The delivery schedule shall be as follows: T +0 day Delivery notice: It is the day when the selling Clearing Member (CM) sends a notice to the Clearing Corporation (CC) expressing his intention to deliver along with details of the security to be delivered. CM shall send the notice before 6:00 pm IST on the second business day prior to the day he wishes to deliver. For example, if he wishes to deliver on 4th September 2009 and 2nd and 3rd are business days, he shall give notice before 6 PM on 2nd September 2009. Al....
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....on One tailed standard normal variate corresponding to 99 % confidence interval is 2.33. However, simulation on the historical data showed that 99 % of data could be covered only with 3.5 times standard.deviation.. Methodology A, as specified in 7.1.21, shall be adopted for computation of initial margin. For this purpose, the yield for 10-Year benchmark GoI security, as published by FIMMDA, shall be used. For the purpose of intra-day updation of VaR, the Exchanges shall use the yield of the benchmark 10-Year bond, from the NDS Order Matching platform. The initial margin so computed would be subject to a minimum of 2.33% of the value of the futures contract on the first day of trading in 10-year Notional Coupon-bearing GoI security futures and 1.6% of the value of the futures contract thereafter. The initial margin shall be deducted from the liquid net worth of the clearing member on an online, real time basis. 7.1.18 Extreme Loss Margin Extreme loss margin of 0.3% of the value of the gross open positions of the futures contract shall be deducted from the liquid assets of the clearing member on an on line, real time basis. 7.1.19 Calendar Spread Margin Interest rate futures pos....
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....me t. ii. The "return" is defined as the logarithmic return: rt = ln(Yt/Yt-1) where Yt is the yield of 10-year Notional Coupon-bearing GoI security futures at time t. For computing the margin, two methodologies can be considered. Methodology A. The plus/minus 3.5 sigma limits The one-tailed standard normal variate corresponding to 99% confidence interval is 2.33. However, since 3.5 standard deviations cover 99 % of the historical data, σ has been taken as 3.5 in all computations. for a 99% VAR based on logarithmic returns on yield of 10-year Notional Coupon-bearing GoI security futures would have to be converted into price volatility through the following formula : σpt=D*σyt* Yt where σpt is the standard deviation of percentage change in price at time t; D is Modified Duration Ci is coupon at time ti, y is the annually compounded yield, m is the frequency of coupon payments, B is the price of the bond. Modified duration essentially measures percentage change in price due to change in yield by 100 bps.; Y where Y is the YTM of the security, B is the price of the security, P is the par value of the bond, n is the number of periods for coupon payment, ....
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....t in government securities and the total gross short (sold) position, for the purpose of hedging only, should not exceed their long position in the government securities and in Interest Rate Futures, at any point in time. 7.2 Risk Management Measures 7.2.1 Introduction In exchange traded derivative contracts, the Clearing Corporation acts as a central counterparty to all trades and performs full novation. The risk to the Clearing Corporation can only be taken care of through a stringent margining framework. Also, since derivatives are leveraged instruments, margins also act as a cost and discourage excessive speculation. A robust risk management system should therefore, not only impose margins on the members of the Clearing Corporation but also enforce collection of margins from the clients. 7.2.2 Portfolio Based Margining The Standard Portfolio Analysis of Risk (SPAN) methodology shall be adopted to take an integrated view of the risk involved in the portfolio of each individual client comprising his positions in futures contracts across different maturities. The clientwise margins would be grossed across various clients at the Trading / Clearing Member level. The prop....
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.... futures contract to SEBI. The methodology for calculating the 'theoretical price' would also be disclosed to the market. 7.2.7 Margin Collection and Enforcement The client margins (initial margin, extreme loss margin, calendar spread margin and mark to market settlements) have to be compulsorily collected and reported to the Exchange by the members. The Exchange shall impose stringent penalty on members who do not collect margins from their clients. The Exchange shall also conduct regular inspections to ensure margin collection from clients. 7.2.8 Safeguarding Client's Money The Clearing Corporation should segregate the margins deposited by the Clearing Members for trades on their own account from the margins deposited with it on client account. The margins deposited on client account shall not be utilized for fulfilling the dues which a Clearing Member may owe the Clearing Corporation in respect of trades on the member's own account. The client's money is to be held in trust for client purpose only. The following process is to be adopted for segregating the client's money vis-à-vis the clearing member's money: i At the time of opening a position, the member should in....
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....y/Equity Derivative Segment shall be eligible to trade in Interest Rate Derivatives also, subject to fulfilling the requirements mentioned in 6.4.1. 7.3.4 SEBI-RBI Coordination Mechanism A SEBI-RBI constituted committee would meet periodically to sort out issues, if any, arising out of overlapping jurisdiction of the interest rate futures market. 7.4 Miscellaneous Issues 7.4.1 Banks Participation in Interest Rate Futures It is stated in the RBI Report on Interest Rate Futures that "...the current approval for banks' participation in IRF for hedging risk in their underlying investment portfolio of government securities classified under the Available for Sale (AFS) and Held for Trading (HFT) categories should be extended to the interest rate risk inherent in their entire balance sheet - including both on, and off, balance sheet items - synchronously with the re-introduction of the IRF." 7.4.2 Extending the Tenor of Short Sales In the RBI Report on Interest Rate Futures, it has been recommended that the time limit on short selling be extended so that term / tenor / maturity of the short sale is co-terminus with that of the futures contract and a system of transparent and....
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.... 5 times during a period of preceding 6 months, the trading facility of all the trading members clearing through the CM shall be withdrawn for 7 days. 7.4.3.3 Margins and action on deliverable positions i Margins on physical delivery positions: For positions marked for delivery, a margin equal to VaR of the futures on the invoice price plus 5% of face value along with mark to market adjustments shall be charged both to the buying client and selling client. The margins shall be levied from the intention day and shall be released on the completion of the settlement. ii Margins from last trading day to last intention day: For positions from last trading date till date of intention in cases where no intention is provided, a margin amount equal to VaR of the futures on the invoice price of the costliest security from the deliverable basket plus 5% of face value along with mark to market adjustments based on the underlying closing prices of the costliest security from the deliverable basket shall be charged on both buying client and selling client. The margins shall be levied from the last trading day till the day of receipt of intention to deliver. Action in case no intent to deliv....
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....es. The various scenarios of price changes would be so computed so as to cover a 99% VaR over a one day horizon. In order to achieve this, the price scan range may initially be fixed at 3.5 standard deviation. The initial margin so computed would be subject to a minimum of 0.1 % of the notional value of the contract on the first day of trading in 91-day Tbill futures and 0.05 % of the notional value of the contract thereafter (the notional value of the contract shall be Rs. 2,00,000). The initial margin shall be deducted from the liquid net worth of the clearing member on an online, real time basis. 8.1.13 Extreme Loss margin Extreme loss margin of 0.03 % of the notional value of the contract for all gross open positions shall be deducted from the liquid assets of the clearing member on an on line, real time basis. 8.1.14 Calendar spread margin Interest rate futures position at one maturity hedged by an offsetting position at a different maturity would be treated as a calendar spread. The calendar spread margin shall be at a value of ` 100/- for spread of one month, ` 150 for spread of two month, ` 200/- for spread of three month and ` 250/- for spread of four month and beyond.....
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.... futures, the sigma would be equal to 2.7 %. 8.1.16 Position limits 8.1.16.1 Client Level: The gross open positions of the client across all contracts should not exceed 6% of the total open interest or Rs. 300 crores whichever is higher. The Exchange will disseminate alerts whenever the gross open position of the client exceeds 3% of the total open interest at the end of the previous day's trade. 8.1.16.2 Trading Member Level: The gross open positions of the trading member across all contracts should not exceed 15% of the total open interest or Rs. 1000 crores whichever is higher. 8.1.16.3 Clearing Member Level: No separate position limit is prescribed at the level of clearing member. However, the clearing member shall ensure that his own trading position and the positions of each trading member clearing through him is within the limits specified above. 8.1.16.4 FIIs: In case of Foreign Institutional Investors, registered with Securities and Exchange Board of India, the total gross long (bought) position in cash and Interest Rate Futures markets taken together should not exceed their individual permissible limit for investment in government securities and the total gross....
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....e last Thursday of the expiry month. If any expiry day is a trading holiday, then the expiry/ last trading day would be the previous trading day. 9.1.11 Final Contract Settlement Value The Final Contract Settlement Value would be = 2000 * Pf where Pf is the settlement price of the notional bond. 9.1.12 Initial Margin The Initial Margin requirement shall be based on a worst case loss of a portfolio of an individual client across various scenarios of price changes. The various scenarios of price changes would be so computed so as to cover a 99% VaR over a one day horizon. In order to achieve this, the price scan range may initially be fixed at 3.5 standard deviation. The initial margin so computed would be subject to a minimum of 0.35 % of the notional value of the contract on the first day of trading in Futures on 2 Year Notional Coupon Bearing Government of India (GoI) Security and 0.3 % of the notional value of the contract thereafter. The initial margin shall be deducted from the liquid net worth of the clearing member on an online, real time basis. 9.1.13 Extreme Loss margin Extreme loss margin of 0.1 % of the notional value of the contract for all gross open positions sh....
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....eal time basis on the trading workstation screen. xii. During the first time-period on the first day of trading in 2 Year Notional Coupon Bearing Government of India (GoI) Security futures, the sigma would be equal to 0.10 %. 9.1.16 Position Limits 9.1.16.1 Client Level The gross open positions of the client across all contracts should not exceed 6% of the total open interest or Rs. 300 crores whichever is higher. The Exchange will disseminate alerts whenever the gross open position of the client exceeds 3% of the total open interest at the end of the previous day's trade. 9.1.16.2 Trading Member Level The gross open positions of the trading member across all contracts should not exceed 15% of the total open interest or Rs. 1000 crores whichever is higher. 9.1.16.3 Clearing Member Level No separate position limit is prescribed at the level of clearing member. However, the clearing member shall ensure that his own trading position and the positions of each trading member clearing through him is within the limits specified above. 9.1.16.4 FIIs In case of Foreign Institutional Investors registered with Securities and Exchange Board of India the total gross long (bought) posi....
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.... Dealer 8 (5.9600) 5.9500 6.0100 (6.0000) 6.0500 (6.0400) Dealer 9 5.9625 (5.9475) 6.0050 5.9950 6.0450 6.0350 Dealer 10 5.9700 (5.9500) 6.0100 (5.9900) 6.0450 6.0350 11:30 AM Bond 1 Bond 2 Bond 3 Dealer Buy Yields Sell Yields Buy Yields Sell Yields Buy Yields Sell Yields Dealer 1 5.9700 5.9600 6.0150 6.0050 (6.0600) (6.0500) Dealer 2 (5.9750) 5.9600 6.0150 6.0000 6.0550 6.0375 Dealer 3 5.9750 (5.9650) 6.0175 (6.0075) 6.0575 (6.0475) Dealer 4 5.9700 (5.9650) 6.0125 (6.0075) 6.0525 6.0475 Dealer 5 (5.9700) (5.9500) (6.0100) (5.9900) (6.0450) (6.0250) Dealer 6 5.9725 5.9600 6.0125 6.0000 6.0550 6.0400 Dealer 7 (5.9775) 5.9575 (6.0200) 6.0000 (6.0600) 6.0400 Dealer 8 5.9750 5.9550 (6.0200) 6.0000 6.0550 (6.0350) Dealer 9 5.9750 (5.9550) 6.0150 6.0050 6.0600 6.0400 Dealer 10 (5.9700) 5.9600 (6.0050) (5.9950) (6.0500) 6.0400 12:00 PM Bond 1 Bond 2 Bond 3 Dealer Buy Yields Sell Yields Buy Yields Sell Yields Buy Yields Sell Yields Dealer 1 5.9750 (5.9650) 6.0200 (6.0100) (6.0650) (6.0550) Dealer 2 5.9750 5.9600 6.0175 6.0025 6.0575 6.0450 Dealer 3 ....
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....rities maturing at least 4.5 years but not more than 5.5 years from the expiry day. 10.1.8 Contract Value The contract value would be: = Quoted price * 2000 10.1.9 Daily Contract Settlement Value The Daily Contract Settlement Value would be: = 2000 * Pw (Here Pw is weighted average futures quote of last half an hour). In the absence of last half an hour trading, theoretical futures price would be considered for computation of Daily Contract Settlement Value. Exchanges would be required to disclose the model/methodology used for arriving at the theoretical price. 10.1.10 Expiry/Last trading day The expiry / last trading day for the contract would be the last Thursday of the expiry month. If any expiry day is a trading holiday, then the expiry/ last trading day would be the previous trading day. 10.1.11 Final Contract Settlement Value The Final Contract Settlement Value would be = 2000 * Pf where Pf is the settlement price of the notional bond. 10.1.12 Initial Margin The Initial Margin requirement shall be based on a worst case loss of a portfolio of an individual client across various scenarios of price changes. The various scenarios of price changes would be so compute....
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....sigma;)-1) and the percentage margin on long positions would be equal to 100(1-exp(-3.5σ)). This implies slightly larger margins on short positions than on long positions. The derivatives exchange/clearing corporation may apply the higher margin on both the buy and sell side. iii. The volatility estimation and margin fixation methodology should be clearly made known to all market participants so that they can compute the margin for any given closing level of the interest rate futures price. Further, the trading software itself should provide this information on a real time basis on the trading workstation screen. iv. During the first time-period on the first day of trading in 5 Year Notional Coupon Bearing GoI Security futures, the sigma would be equal to 0.2 %. 10.1.16 Position Limits 10.1.16.1 Client Level The gross open positions of the client across all contracts should not exceed 6% of the total open interest or Rs. 300 crores whichever is higher. The Exchange will disseminate alerts whenever the gross open position of the client exceeds 3% of the total open interest at the end of the previous day's trade. 10.1.16.2 Trading Member Level The gross open positions of....
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....2 Bond 3 Dealer Buy Yields Sell Yields Buy Yields Sell Yields Buy Yields Sell Yields Dealer 1 5.9600 5.9500 (6.0100) (6.0000) (6.0250) (6.0425) Dealer 2 5.9625 5.9500 6.0025 5.9925 6.0450 6.0300 Dealer 3 5.9650 (5.9550) 6.0050 5.9950 6.0450 6.0350 Dealer 4 (5.9600) (5.9550) (6.0025) 5.9975 (6.0425) 6.0375 Dealer 5 5.9625 5.9500 (6.0025) 5.9900 (6.0550) (6.0275) Dealer 6 (5.9725) 5.9525 (6.0175) 5.9975 (6.0575) 6.0375 Dealer 7 (5.9700) 5.9500 6.0100 (5.9900) 6.0475 (6.0275) Dealer 8 (5.9600) 5.9500 6.0100 (6.0000) 6.0500 (6.0400) Dealer 9 5.9625 (5.9475) 6.0050 5.9950 6.0450 6.0350 Dealer 10 5.9700 (5.9500) 6.0100 (5.9900) 6.0450 6.0350 11:30 AM Bond 1 Bond 2 Bond 3 Dealer Buy Yields Sell Yields Buy Yields Sell Yields Buy Yields Sell Yields Dealer 1 5.9700 5.9600 6.0150 6.0050 (6.0600) (6.0500) Dealer 2 (5.9750) 5.9600 6.0150 6.0000 6.0550 6.0375 Dealer 3 5.9750 (5.9650) 6.0175 (6.0075) 6.0575 (6.0475) Dealer 4 5.9700 (5.9650) 6.0125 (6.0075) 6.0525 6.0475 Dealer 5 (5.9700) (5.9500) (6.0100) (5.9900) (6.0450) (6.0250) Dealer 6 5.9725 5.9600 6.0125 ....
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....6. Singapore Exchange 7. TAIFEX 8. Tokyo Stock Exchange Group Europe, Africa, Middle East 1. Borsa Italiana 2. Eurex 3. Johannesburg SE 4. MEFF 5. NASDAQ OMX Nordic Exchange 6. NYSE Liffe (European markets) 7. Oslo Børs 8. Tel Aviv SE ii. In terms of trading volumes (number of contracts), derivatives on that Index figure among the top 15 Index derivatives globally. OR That Index has a market capitalization of at least USD 100 billion. iii. That index is "broad based". An Index is broad based if : a.The Index consists of a minimum of 10 constituent stocks and b.No single constituent stock has more than 25% of the weight, computed in terms of free float market capitalization, in the Index. 11.3 Failure to meet Eligibility Criteria After introduction of derivatives on a particular stock index, if that stock index fails to meet any of the eligibility criteria for three months consecutively, no fresh contract shall be introduced on that Index. However, the existing unexpired contracts would be traded till expiry and new strikes may be introduced on those contracts. 11.4 Currency Denomination The absolute numerical value of the underlying fo....
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....asis for any adjustment for corporate action shall be such that the value of the position of the market participants on cum and ex-date for corporate action shall continue to remain the same as far as possible. This will facilitate in retaining the relative status of positions viz. in-the-money, at-the-money and out-of-money. This will also address issues related to exercise and assignments. b. Any adjustment for corporate actions shall be carried out on the last day on which a security is traded on a cum basis in the underlying cash market. c. Adjustments shall mean modifications to positions and/or contract specifications as listed below such that the basic premise of adjustment laid down in para a. above is satisfied : 1. Strike Price 2. Position 3. Market Lot/Multiplier The adjustments shall be carried out on any or all of the above based on the nature of the corporate action. The adjustments for corporate actions shall be carried out on all open, exercised as well as assigned positions. The corporate actions may be broadly classified under stock benefits and cash benefits. The various stock benefits declared by the issuer of capital are: * Bonus * Rights * Merg....
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....for other corporate actions as decided by the group in conformity with the above guidelines. Stock Exchanges to give notice of four weeks to the market for any change in the contract specifications and also in case of change in a constituent of an Index on which derivatives are available. Clause 16 of the Equity Listing Agreement includes that the company on whose stocks, derivatives are available or whose stocks form part of an index on which derivatives are available, shall give a notice period of 30 days to stock exchanges for corporate actions like mergers, de-mergers, splits and bonus shares. All the following conditions shall be met in the case of shares of a company undergoing restructuring through any means for eligibility to re-introduce derivative contracts on that company from the first day of listing of the post restructured company/(s) 's (as the case may be) stock (herein referred to as post restructured company) in the underlying market, a. the futures and options contracts on the stock of the original (pre restructure) company were traded on any exchange prior to its restructuring; b. the pre restructured company had a market capitalisation of at least Rs. 1000....
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....s for the transactions in derivative contracts, to the media/newspapers, on a daily basis: a. Contracts Description b. Number of contracts traded c. Notional Value (for option contracts, notional value would be calculated as [strike + Premium] * lot size * number of contracts traded). d. Open e. High f. Low g. Value of premium traded (for option contracts) h. Open Interest (in number of contracts) 12.3 Straight through Processing Straight Through Processing (STP) is generally understood to be a mechanism that automates the end to end processing of transactions of financial instruments. It involves use of a system to process or control all elements of the work flow of a financial transaction, what are commonly known as the Front, Middle, Back office and General Ledger. In other words, STP allows electronic capturing and processing of transactions in one pass from the point of order origination to final settlement. STP thus streamlines the process of trade execution and settlement and avoids manual entry and re-entry of the details of the same trade by different market intermediaries and participants. Usage of STP enables orders to be processed, confirmed, settled i....
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....erify the signature of the STP centralized hub, verify if the recipient STP user is associated with itself and send an appropriate acknowledgment with digital signature to the STP centralized hub. The STP centralized hub would in turn forward the acknowledgment (received from the recipient STP service provider) duly signed to the sending STP service provider. f. The recipient STP service provider shall forward the message to the recipient STP user. The recipient STP user would receive the message and verify the signature of the recipient STP service provider and sending STP user. To enable inter-operation, the STP centralized hub would provide a utility / client software to the STP service provider. The STP service provider's point of interface with the STP centralized hub would be through this utility / client software. The PKI (Public key infrastructure) system for the interface shall be implemented at a later stage. The block diagram of the entire STP System is enclosed in Annexure I. SEBI in order to regulate the STP service has issued the SEBI (STP centralised hub and STP service providers) Guidelines, 2004 (herein referred to as "STP Guidelines") which also prescribes the....
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....IFN 541) g. IFN 546: confirmation of a settlement instruction for a sell trade free of payment (response to IFN 542). h. IFN 547: confirmation of a settlement instruction for a sell trade against payment (response to IFN 543) It is also clarified that in the IFN 515 message, if the trade is intended to be settled by the custodian with the Clearing Corporation (by accepting the settlement obligation), then it shall be termed as "FREE" and if the trade is intended to be settled by the broker with the Clearing Corporation then it shall be termed as "APMT" (meaning against payment) in the tag 22H of the IFN 515 message. In order to integrate the Securities Transaction Tax (STT) in the STP system, it would be necessary to provide for necessary fields in the appropriate messaging standards. After deliberation with the STP centralised hub and the STP service providers, it has been decided to make the following modifications in the prescribed messaging formats: a. Message Types that shall be modified are IFN515, IFN540, IFN541, IFN542 and IFN543 b. A Qualifier shall be used to identify Securities Transaction Tax Amount: "COUN", Country, National Federal Tax. c. The change in t....
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....rsons in the derivative market are given as Annexure IV. 12.5 Introduction of Volatility and Bond Index 12.5.1 Volatility Index Exchanges shall construct a Volatility Index and disseminate the same. The Exchanges are free to decide whether they want to adopt any of the Volatility Index computation models available globally or may like to develop their own model for computation of Volatility Index. The detailed methodology for computing the Volatility Index shall be disseminated by the Exchange for the benefit of the market participants and investors. 12.5.2 Derivatives on Volatility Index Stock Exchanges are permitted to introduce derivative contracts on Volatility Index, subject to the conditions that: * The underlying Volatility Index has a track record of at least one year. Page 111 of 156 * The Exchange has in place the appropriate risk management framework for such derivative contracts. Before introduction of such contracts, the Stock Exchanges shall submit the following to SEBI: I. Contract specifications II. Position and Exercise Limits III. Margins IV. The economic purpose it is intended to serve V. Likely contribution to market development VI. The sa....
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....ty from trading members and credit the same to its Investor Protection Fund as under: 'a' as % of 'b' Penalty as % of 'a' ≤ 5 1 > 5 2 Where, a = Value (turnover) of non-institutional trades where client codes have been modified by a trading member in a segment during a month. b = Value (turnover) of non-institutional trades of the trading member in the segment during the month. ii. The Stock Exchange shall conduct a special inspection of the trading member to ascertain whether the modifications of client codes are being carried out only to rectify genuine errors as mentioned above, if 'a' as a % of 'b', as defined above, exceeds 1% during a month and take appropriate disciplinary action, if any deficiency is observed. iii. Exemption from penalty: Shifting of trades to the error account of broker would not be treated as modification of client code, provided the trades in error account are subsequently liquidated in the market and not shifted to some other code. Further, brokers shall disclose the codes of accounts which are classified as 'error accounts' to the Exchanges. Each broker should have a well documented error policy approved by the management of the broke....
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.... that segment. g. The penalty shall be collected by the Stock Exchange within five days of the last working day of the trading month and credited to its Investor Protection Fund. h. The margin statement which is forwarded on a daily basis by the broker to the clients shall include a column stating the margin charged by the Exchange/Clearing Corporation. i. When penalty is being collected by a broker for short collection / noncollection from a client, then the broker shall provide the relevant supporting documents to the client. SEBI shall examine implementation of the provisions mentioned above under Section 12.9 during inspection of the Stock Exchanges. 12.8 Liquidity Enhancement Schemes for Illiquid Securities in Equity Derivatives Segment Stock Exchanges are permitted to introduce one or more liquidity enhancement schemes (LES) to enhance liquidity of illiquid securities in their equity derivatives segments subject to following conditions: 1. The Stock Exchange shall ensure that the LES, including any modification therein or its discontinuation, a. has the prior approval of its Board and its implementation and outcome is monitored by the Board at quarterly intervals; ....
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....inancial year, shall not exceed 25% of the issued and outstanding shares of the Stock Exchange as on the last day of the preceding financial year. 7. The Stock Exchange shall submit half-yearly reports on the working of its LES for review of SEBI. Implementation of LES shall be covered in the inspection of the Stock Exchange conducted by SEBI. 12.9 Requirement of Base Minimum Capital for Trading Member 1. Base Minimum Capital (BMC) is the deposit given by the member of the exchange against which no exposure for trades is allowed. The BMC deposit requirement was prescribed to be commensurate with the risks, other than market risk, that the broker may bring to the system. It has been decided to realign the BMC requirements with the risk profiles of the stock brokers / trading members in cash / derivative segment of the stock exchange. 2. Accordingly, the requirement of BMC would be implemented in the following manner - a. Stock brokers / trading members shall maintain the prescribed BMC based on their profiles - Categories BMC Deposit(in INR) Only Proprietary trading without Algorithmic trading (Algo) 10 Lacs Trading only on behalf of Client (without proprietary trading) ....
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....force on 26th day of May, 2004 2) DEFINITIONS (1) In these Guidelines, unless the context otherwise requires:- (a) "Act" means the Securities and Exchange Board of India Act, 1992; (b) "Certifying Authority" means a certifying authority who has been granted a license under section 24 of the Information Technology Act, 2000; (c) "SEBI" means the Securities and Exchange Board of India established under Section 3 of the Act; (d) "STP" means straight through processing; (e) "STP centralised hub" means an infrastructure set-up by a person or entity for the purpose of rendering STP service by providing a platform for communication between different STP service providers; (f) "STP message" means and includes all the messages for electronic trade processing with a common messaging standard as may be defined by SEBI from time to time; (g) "STP service" means the setting up and maintaining of infrastructure to create an electronic communication network to facilitate information exchange with respect to securities market transactions between various market participants from the stage of trade initiation to final settlement through a STP system flow as may be determined by SEBI from ....
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....ders. v. The STP centralised hub shall deliver a consistent and secure communication platform and shall establish continuous connectivity with all the recognized STP service providers to the best of its ability. vi. The STP centralised hub shall verify the digital signature certificate furnished by the STP Service Provider before connecting it to the STP centralized hub. vii. The STP centralised hub shall confirm authenticity, integrity and nonreputability of all messages submitted by the STP Service Provider. viii. The STP centralised hub shall ensure that the message received from the STP service provider is in the specified messaging standard. ix. The STP centralised hub shall promptly deliver the messages to the recipient STP service provider and shall ensure that only the intended STP Service Provider receives the message. x. The STP centralised hub shall digitally sign all messages sent to the STP service provider. xi. The STP centralised hub shall maintain a directory of all STP service providers and STP users. xii. The STP centralised hub shall maintain a complete record of the flow of messages processed. The records of the STP centralised hub shall be open for insp....
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....he STP service provider shall confirm authenticity, integrity and nonrepudiability of all messages submitted to the STP centralised hub. The STP service provider shall keep complete track of the flow of messages for record and audit. xii. The STP service providers may charge reasonable fees from the STP users. xiii. The STP service provider shall exchange messages between other STP service providers only through the STP centralised hub. Provided that in force majuere measures or any other circumstances due to which the connectivity of the STP centralised hub is not available, the STP service providers after mutual discussion may exchange messages directly among themselves for such period. xiv. The STP service providers shall digitally sign all messages sent from it to the STP centralised hub. xv. The STP service provider shall enter into an agreement with all its STP users which shall also specify the fees payable by the STP user for the services. xvi. The STP service provider shall maintain a directory of the STP users connected to it. xvii. The STP service provider shall maintain a complete record of the flow of messages handled. The records of the STP service provider shal....
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....ngs. d. The STP service provider shall abide by the obligation as specified under these Guidelines and the terms of the agreement entered into by the STP service provider with the STP users / STP centralised hub. e. The STP service provider shall maintain true and correct record of the messages processed by it under the scheme and in particular the records in respect of:- i. the STP users ii. the messages exchanged within the same STP service provider iii. the messages exchanged with other STP service providers through the STP centralised hub f. The STP service provider shall ensure that the message is not misused or tampered with while in its possession. g. The STP service provider shall maintain confidentiality of information about its users and shall not divulge the same to other clients, the press or any other interested party except in accordance with law or as per the directions of any court of law. h. The STP service provider shall abide by all the provisions of the Act, Rules, Regulations, Guidelines, Resolutions, Notifications, Directions, Circular, etc. as may be issued by the Government of India / Telecom Regulatory Authority of India / Department of Telecommu....
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....mpatible protocols; and 5. "TELECOM AUTHORITY" shall mean The Director General, DoT, Government of India and includes any officer empowered by him to perform all or any of the functions of the Telegraph Authority under the Indian Telegraph Act, 1885 or such other authority as may be established by law. 6. "TRAI" - shall mean the Telecom Regulatory Authority of India established under the TRAI Act, 1997. B. FEES PAYABLE BY STP SERVICE PROVIDER - The STP Service Provider agrees to pay Fees as listed in the Annexure III(A) in consideration for the services provided by STP centralised hub hereof. The said fees may be revised by STP centralised hub as may be mutually agreed upon with the STP Service Providers. The STP service provider shall also be liable to pay interest @___% p.a. in case of delay in payments on the amount due till the actual date of payment. C. STP SERVICE PROVIDER OBLIGATION 1. The STP Service Provider shall obtain a digital signature certificate from a Certifying Authority, which has been issued a license by the Controller of Certifying Authorities appointed under the Information Technology Act, 2000. A copy of the Certificate shall be submitted to STP centr....
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....sued a license by the Controller of Certifying Authorities appointed under the Information Technology Act, 2000. A copy of the Certificate shall be submitted to STP service provider. 2. STP centralised hub acknowledges that STP infrastructure of the STP service provider is the legal property of STP service provider. The permission given by STP service provider to STP centralised hub's STP hub client software to co-locate on STP infrastructure will not convey any proprietary or ownership rights in the STP infrastructure. 3. STP centralised hub may subcontract and employ agents to carry out any of its obligations under such terms and conditions as may be mutually agreed. 4. STP centralised hub shall be solely responsible for installation, networking and operation of applicable systems. STP centralised hub shall clearly display and publicise specifications of STP Service Providers terminal equipment at Service Provider premises which are necessary for interfacing to network. 5. STP centralised hub shall abide by the guidelines issued by SEBI from time to time on the STP framework. 6. STP centralised hub shall confirm authenticity, integrity and non-repudiability of all messages s....
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....nd statutes under Indian Law (including the security measures prevalent in India) and shall not hold the other party responsible for any lapse in this regard. This shall include, but not be limited to, the knowledge and understanding of the physical, environmental and technical standards required for the provision and operation of the Equipment, software and services within India. The monetary obligations, if any, devolving on either of the parties due to statutory changes subsequent to the conclusion of the Agreement, shall be borne by the respective party, if applicable. F. SERVICE CHANGES AND DISCONTINUATION STP centralised hub shall if directed by regulatory authorities, suspend the STP Service Provider's access to the STP Centralized Hub at any time without notice. The STP Service Provider agrees that STP centralised hub will not be liable to any third party for any modification or discontinuance of the STP Centralized Hub. If STP centralised hub receives prior notice of such direction it shall be communicated to the service provider immediately. In order to maintain the security and integrity of the service STP centralised hub may also suspend the STP Service Provider's a....
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....conditions of this agreement, are hereby declared null and void. I. VALIDITY This Agreement is valid so long as STP service provider holds valid approval from SEBI and STP centralised hub holds valid approval as STP Centralised Hub from SEBI. This Agreement shall be valid for an initial period of _____ years (hereinafter referred to as the 'Term'). After the term, the arrangement may be extended on mutually acceptable terms. H. TERMINATION Without prejudice to the rights, liabilities, interests and obligations that have accrued to the parties prior to the date of terminations 1. Either party may terminate this agreement upon material breach by the other of any provision of this agreement, and (if such breach is remediable) that other fails to remedy such breach within a mutually agreed time frame in writing. 2. This agreement may, at any time during its Term, be terminated by either party by a written 90 days notice to the other party without prejudice to the rights, liabilities, interests and obligations that have accrued to the parties prior to the date of such termination. The grounds upon which this agreement may be terminated pursuant to this clause are as under: i) ....
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....of this agreement or losses or damages arising under clause C-8 and the relevant clause under STP Centralizedized hub of this agreement, the same shall be resolved by mutual discussion. If the parties fail to settle the dispute or difference mutually, then the same shall be resolved in accordance with and subject to the provisions of the Arbitration and Conciliation Act, 1996 or any modifications or amendments thereto, or any enactment for the time being in force subject to the stipulation that only courts at Mumbai shall have exclusive jurisdiction in all such matters. The provisions of this clause shall survive the termination of this agreement. L. GOVERNING LAW 1. This agreement shall be governed by and construed and interpreted in accordance with the laws of India, SEBI Act, Regulations, Rules and SEBI (STP centralised hub and STP service providers) Guidelines, 2004. 2. If any term or provision of this agreement should be declared invalid by a court of competent jurisdiction, the remaining terms and provisions of this agreement shall remain unimpaired and in full force and effect. M. DISCLAIMER STP centralised hub shall use its best endeavor only to ensure that the servi....
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....uted on a quarterly basis. Planned Outage excluded - Uptime on best effort basis between 1930 hrs to 0930 hrs - Resolution time: 4 hours for called logged between 0930 to 1800 hrs * Trouble Ticketing - Business Hrs - Telephonic reporting of Fault on STP centralised hub Helpdesk - Non-Business Hrs - Telephonic reporting of Fault on STP centralised hub Operations - Call closure confirmation - STP service Provider to give respective telephone numbers 13.3 ANNEXURE- III Message IFN 515: Mandatory Block A (General Information) Status Field Field Name Content and Options Remarks Rules M 16R GENL Start of block M 20C Reference :4!c//16x Type of CN, Exchange number and CN No. Format: (Qualifier)/ (References) Qualifier: "SEME" (4 Uppercase Characters) References: (Contract Type/ Exchange No. / Contract Number) Contract Type: A or B (1 Character Set) Exchange number (2 digits - e.g. Calcutta Stock Exchange will be 03 ) Contract Number: xxxxxxxxxx (13Characters) The reference should not start or end with slash '/' and must not contain two consecutive slashes '//'. M 23G 4!c To indi....
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....Uppercase Characters) Sign (-/+) Price: Upto 15 digits (including decimal places and decimal sign) comma has to be used as decimal sign and is mandatory. Integer part of amount must contain atleast one digit. M 94B Place :4!c//4!c/30 x To identify the exchange Format:(Qualifier)/ /(Place Code)/(MAPIN code / Narrative) Qualifier: "TRAD" (4 Uppercase Characters) Place Code: "EXCH" (4 Uppercase Characters) M 22H Indicator :4!c//4!c To indicate whether the trade is Buy [BUYI] / Sell [SELL] Format: (Qualifier)//(Indicator) Qualifier: "BUSE" (4 Uppercase Characters) Indicator: "BUYI" or "SELL" (4 Uppercase Characters) M 22H Indicator :4!c//4!c To indicate where the trades is against payment [APMT] or free of payment [FREE] Format: (Qualifier) //(Indicator) Qualifier: "PAYM" (4 Uppercase Characters) Indicator: "FREE" for clearing house trades or "APMT" for DVP trades(4 Uppercase Characters) Mandatory Sub Block C1 (Confirmation Parties) M 16R CONFPRT Y Start of block M 95Q Party :4!c//4*35x To give details of the client as menti....
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.... M 16S CONFDE T End of block End of Sequence C (Confirmation Details) Mandatory Sequence D (Settlement Details) M 16R SETDET Start of block M 22F Indicator :4!c//4!c Dummy (since mandatory) Format: (Qualifier) //(Indicator) Qualifier: "SETR" (4 Upper Characters) Indicator: "TRAD" (4 Upper Characters) Mandatory Subsequence D1 (Settlement Parties) M 16R SETPRTY Start of block M 95P Party :4!c//4!a2!a 2!c[3!c] Indicates the contracting broker Broker BIC code is used shall not be used case the BIC code doesn't exist 95Q Party :4!c//4*35x Indicates the Broker Format: (Qualifier)//(SEBI regn no. of broker) MAPIN will used on SEBI mandating the same Qualifier: "BUYR" in case of a Sale "SELL" in case of a Purchase Name:of the contracting broker O 70C Narrative :4!c//4*35x To provide additional broker contact details Format....
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....p; M 16S AMT End of block M 16R AMT Start of block M 19A Amount :4!c//3!a15 d To identify the brokerage For Brokerage: Qualifier: "EXEC" (4 Upper case Characters) Narrative: "INR" (3 Upper Letters) Amount: upto 15 digits (including decimal places and decimal sign) comma has to be used as decimal sign and is mandatory. Integer part of amount must contain atleast one digit. M 16S AMT End of block M 16R AMT Start of block M 19A Amount :4!c//3!a15 d To identify the service tax For Service Tax: Qualifier: "TRAX" (4 Upper case Characters) Narrative: "INR" (3 Upper Letters) Amount: upto 15 digits (including decimal places and decimal sign) comma has to be used as decimal sign and is mandatory. Integer part of amount must contain atleast one digit. M 16S AMT End of block &....
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....ualifier: "SEME" Reference Number: 16 Characters (Alphanumeric) The reference should not start or end with slash '/' and must not contain two consecutive slashes '//'. M 12 Sub-message type 3!n To identify sub-message type Value = 548 M 23G 4!c To convey that this message is meant to indicate a transaction status [INST] Format: (Qualifier)Qualifier: "INST" O 98A Date/Time :4!c//8!n Preparation Date Format: (Qualifier) //(Date) Qualifier: "PREP" (4 Characters) Date: YYYYMMDD (8 number) Mand atory Subs eque nce A1 Linka ges M 16R LINK Start of Block O 13A Link Message Indicator :4c//3d To indicate the corresponding message type received from client. Though this tag is optional, the tag should be made mandatory requirement for Indian Market. Value = 515 Will contain the corresponding message type of client received from client. Should be 515 M 20C Reference :4!c//16x To indicate the reference number of the related contract note. Format: (Qualifier)//(Reference) Qualifier: "RELA" (4 Uppercase Characters) Reference: The reference no. as given in field SEME of the contract note that is being....
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....Security The instruction has not been matched; the counterparty disagrees with the security/issue (i.e. ISIN differs, Financial Instrument Attributes differs...). DTRA- Not Recognised The instruction has not been matched; the counterparty has been contacted or has contacted us. Counterparty does not recognise the transaction. DTRD- Disagreement Trade Date The instruction has not been matched; the counterparty disagrees with the trade date. FORF- Disagreement Forfeit Repurchase Amount The forfeit repurchase amount does not match. FRAP- Disagreement Payment Code The instruction is unmatched because the wrong instruction was sent; your instruction is free, counterparty is against payment or vice versa. ICAG- Incorrect Agent The instruction has not been matched; incorrect delivering or receiving agent. (counterparty is incorrect). ICUS- Disagreement receiving or delivering custodian The instruction has not been matched; incorrect delivering or receiving custodian. IEXE- Incorrect Buyer or Seller The instruction has not been matched; incorrect buyer (receiver) or seller (deliverer). IIND- Disagreement common reference The instruction has not been matched; the counterparty disagrees with....
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....nes of 35 characters each [This is mandatory in case the reason code in 24B is NARR] M 16S REAS End of Block End of Subsequence A2a Reason M 16 S STAT End of Block End of Subsequence A2 Status M 16 S GENL End of Block End of Sequence A General Information Optional Sequence B Settlement Transaction Details M 16 R SETTR AN Start of Block Note: This sequence is to be used only in case of the contract being against payment. M 35 B Security [ISIN1! e12!c] [4*35x] Identification of the Financial Instrument Format: (Identification of Security)(Description of Security)Identification of Security: "ISIN" which will always be present. (ISIN of the security). Additionally, the first line (35 characters) of the description may be used if required and may contain the scrip code (4 lines of 35 Characters) . The contract descriptor shall be provide....
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.... broker. This tag should contain the same information as was uploaded in the corresponding contract note message. Format: (Qualifier)//SEBI Reg. No. / MAP-IN id of contracting broker) Qualifier: "BUYR" in case of a Sale "SELL" in case of a Purchase M 16 S SETPRTY End of block Mandatory Subsequence B1 (Settlement Parties)* M 16 R SETP RTY Start of block M 95 Q Party :4!c//4* 35x Indicates the party with whom trade has to be settled. SEBI reg. Number / MAP-IN id of broker / custodian / seller / clearing house This tag should contain the same information as was uploaded in the corresponding contract note message Format: (Qualifier)//( SEBI reg. No. / MAP-IN of settling party) Qualifier: "REAG" in case of a Sale "DEAG" in case of a Purchase M 16 S SETPRTY End of Block M 16 S SETTRAN End of Block 13.4 ANNEXURE-IV GUIDELINES FOR CONDUCT OF CERTIFICATION EXAMINATION 1. Objective: The examination should attempt to test the practical knowledge and ....
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....iculty though uniformity should be maintained in selection of questions from each level for each candidate. Thus the level of difficulty of a particular test for a particular candidate should be the same as that for any other candidate. 7. Administrative monitoring: The certifying institute should have adequate administrative capability to efficiently run the certification programme. Procedures for enquiries and registration for the certification test should be clearly laid down. The certificate to be issued to successful candidates should carry the photograph of the candidate. The examination should be undertaken on a "no profit" basis. The institution applying for recognition to SEBI shall mention the procedure it expects to follow for sending the candidate's scores to prospective employers. At present the examination should be kept at a 'Basic Entry Level' and later with the development of the market more advanced courses/modules may be added. 13.5 ANNEXURE V List of Circulars issued on Exchange Traded Derivatives 1. March 20, 2013 - Acceptance of Corporate bonds and Government securities as collateral from FIIs 2. Dec 19, 2012 - Requirement of Base Minimum Capit....
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....lendar spread treatment till expiry of the near month contract 33. Aug 06, 2008- Exchange Traded Currency Derivatives 34. Jan 15, 2008- Introduction of Volatility Index 35. Jan 11, 2008- Introduction of Index options with longer tenure 36. Dec 27, 2007- Introduction of mini derivative (Futures and Options) contract on Index -Sensex and Nifty 37. Sep 11, 2007- Circular on acceptance of Foreign Sovereign Securities as collateral from Foreign Institutional Investors (FIIs) for Exchange Traded Derivative Transactions 38. Feb 15, 2006- Clarification to Circular No. DNPD/Cir-31/2006 dated January 20, 2006 39. Jan 20, 2006- Modification of the Trading Member/FII/Mutual Fund position limits for stock based exchange traded derivative contracts 40. Jan 20, 2006- Review of the eligibility criteria of stocks for derivatives trading especially on account of corporate restructuring 41. Sep 14, 2005- Trading by Mutual Funds in Exchange Traded Derivative Contracts Page 155 of 156 42. Nov 22, 2004- Clarification on the definition of institutional trades and use of physical contract note 43. Sep 28, 2004- Modifications in the STP messaging formats on account of implementation of the Secur....