Risk Management for T+2 rolling settlement

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.... to the deliberations of the Group, the stock exchanges shall follow risk management structure given below w.e.f. April 01, 2003:- Categorisation of stocks for imposition of margins 1. The risk containment measures for the scrips would be based on their volatility and liquidity. The scrips would be classified into three groups. 2. The stocks which have traded atleast 80% (+/-5%) of the days for the previous eighteen months from (1st July 2001) shall constitute the Group I and Group II. 3. Out of the scrips identified above, the scrips having mean impact cost of less than or equal to 1% shall be categorised under Group I and the scrips where the impact cost is more than 1, shall be categorised under Group II. 4. The remaining stocks wou....

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....res VaR based margins 7. For the stocks in Group I, the VaR margin will be scrip VaR (3.5 sigma) computed in a manner specified for the scrip on which stock futures are traded. 8. On the stocks in Group II where the impact cost is more than 1, the VaR margin shall be higher of scrip VaR (3.5 sigma) or three times the index VaR, and it shall be scaled up by root 3. 9. For the stocks in Group III, the VaR margin would be equal to five times the index VaR and scaled up by root 3. 10. For the purposes of determining the margins for Group II & Group III, the minimum Index VaR would continue to be taken as 5% as at present. 11. The volatility estimates for the scrips and the index for the VaR shall be computed on the price differential of ....