TaxTMI 
TaxTMI 
TaxTMI 
Comprehensive Risk Management Framework for Electronic Gold Receipts (EGR) segment
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....e EGR segment on the recognized Stock Exchange/s is prescribed in Annexure A to this circular. 4. This circular shall come into force with immediate effect. 5. This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. 6. This circular is issued with the approval of competent authority. 7. This circular is available on SEBI website at www.sebi.gov.in under the category "Circulars" and "Info for Electronic Gold Receipts". Yours faithfully, Priyanka Mahapatra Deputy General Manager Division of Risk Management Commodity Derivatives Market Regulation Department [email protected] ANNEXURE A COMPREHENSIVE RISK MANAGEMENT FRAMEWORK FOR EGR SEGMENT MARGINS 1. Overview The core of the risk management system is the liquid assets deposited by members with the Clearing Corporation (CC). These liquid assets shall cover the following requirements: 1.1. MTM (Mark to Market) Losses: Mark to market losses on outstanding settlement obligations of the member. 1.2. VaR Margi....
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....han 1% of the total liquid assets deposited with the Stock Exchange, shall be exposed to any single bank which has a net worth of less than INR 500 crores and is not rated P1 (or P1+) or equivalent, by a recognized credit rating agency or by a reputed foreign credit rating agency, and not more than 10% of the total liquid assets deposited with the Stock Exchange shall be exposed to all such banks put together. c. Cash equivalents shall be at least 50% of liquid assets. This would imply that Other Liquid Assets in excess of the total Cash Equivalents would not be regarded as part of member's liquid assets as well as total liquid assets. d. For determination of which equity shares are falling in Group-I and what would be the appropriate VaR margin for these securities, data disseminated by Stock Exchanges having equity platform shall be referred. e. Stock Exchanges shall adequately diversify their collateral so as to avoid any concentration of exposure towards any single entity and the same shall be within the limits as may be prescribed by SEBI from time to time. f. Bullion to be accepted as collateral should be of same quality specification which is deliverable under the contra....
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....9.9% of the days (99.9% Value at Risk). The VaR Margin would be based on 6σ, subject to minimum initial margin of 9%. 4.2. Collection of VaR Margin 4.2.1. The VaR margin shall be collected on an upfront basis by adjusting against the total liquid assets of the member at the time of trade. 4.2.2. The VaR margin shall be collected on the gross open position of the member. The gross open position for this purpose would mean the gross of all net positions across all the clients of a member including his proprietary position. 4.2.3. For this purpose, there would be no netting of positions across different settlements. 4.2.4. The value of λ, the parameter which determines how rapidly volatility estimation changes in the Exponentially Weighted Moving Average (EWMA) method shall be considered at 0.995. 4.2.5. The VaR margin so collected shall be released along with the pay-in, including early pay-in of EGR. 4.3. Updation of VaR Margin rate The applicable VaR margin rate shall be updated at least at beginning of day, end of day and interval of not later than two hours, during the trading period. 5. Extreme Loss Margin It covers the expected loss in situations ....
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....under para 17. 7.3. Crystallised losses shall be calculated based on weighted average prices of trades executed. 7.4. Adjustment of intraday crystallised losses shall not be done from exposure free deposit of the clearing member. 8. Provision of Early Pay-in 8.1. Necessary systems shall be put in place to enable early pay-in of funds/ EGR. In cases where early pay-in of funds/EGR is made by the members, the outstanding position to that extent of early pay-in shall not be considered for computing the margin obligations. 8.2. Necessary systems shall be put in place so as to enable adjustment of the pay- in obligations of the members from the cash component of the liquid assets deposited by them. REPORTING AND VERIFICATION OF MARGINS 9. Collection and reporting of margins by Trading Member (TM) /Clearing Member (CM) 9.1. The 'margins' for this purpose shall mean VaR margin, Extreme Loss Margin (ELM), Mark to Market losses (MTM) or any other margin as prescribed by the Clearing Corporation/ SEBI to be collected by TM/CM from their clients. 9.2. The TMs/CMs are required to mandatorily collect upfront VaR margins and ELM from their clients. The TMs/CMs will have time till ....
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....on of other than upfront margins from a client, then the broker shall provide the relevant supporting documents to the client. 11.8. If TM/ CM collects minimum 10% upfront margin in lieu of VaR and ELM from the client, then penalty for short-collection/ non-collection of margin shall not be applicable. However, it is reiterated that CC shall continue to collect the upfront margin from the TM/ CM based on VaR and ELM. 11.9. In respect of penalty for non-collection of "other margins" (other than VaR and ELM) on or before T+1 days from clients by TM/ CM, following is clarified: 11.9.1. If pay-in (both funds and EGR) is made by T+1 working days, the other margins would have deemed to have been collected and penalty for short/ non collection of other margins shall not arise. 11.9.2. If Early Pay-In of EGR has been made to the Clearing Corporation (CC), then all margins would be deemed to have been collected and penalty or short/ non-collection of margin including other margins shall not arise. 11.9.3. If client fails to make pay-in by T+1 working days and TM/ CM do not collect other margins from the client by T+1 working days, the same shall also result in levy of penalty as a....
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....est. The deposit may be by way of cash, fixed deposit receipts or bank guarantee. 14.2.4. Clearing Corporations would have discretion to prescribe stricter criteria for these provisions. 15. Collateral deposited by Clients with brokers 15.1. Provisions related to deposit, segregation and monitoring of collaterals of clients by brokers shall be as per SEBI Circular No. MRD/DoP/SE/Cir- 11/2008 dated April 17, 2008 and SEBI circular No SEBI/HO/MRD2_DCAP/CIR/2021/0598 dated July 20, 2021 and their subsequent amendments, if any, as carried out from time to time. 16. EGR as margin obligation to be given by way of pledge/re-pledge in the depositary system 16.1. Provisions related to use of EGR as margin obligation to be given by way of pledge/re-pledge in the depositary system shall be as per SEBI circular No. SEBI/HO/MIRSD/DOP/CIR/P/2020/28 dated February 25, 2020 and SEBI Circular No. SEBI/HO/MIRSD/DOP/CIR/P/2020/143 dated July 29, 2020 and their subsequent amendments, if any, as carried out from time to time. 17. Risk Reduction Mode 17.1. Clearing Corporation shall ensure that the stock brokers and clearing members are mandatorily put in risk-reduction mode when 90% of the mem....
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....provide specific delivery instructions in favour of the clearing corporation on the settlement day. The delivering member shall complete delivery instructions for transfer of EGR to Clearing Pool Account on settlement day by the specified pay-in time. 21.3. The depositories shall credit the receiving members' pool account/ clients beneficiary account in accordance with the pay-out instructions received electronically from Clearing Corporation on the settlement day by the specified pay-out time. 21.4. Depositories/Clearing Corporation shall provide following facilities as under: 21.4.1. Facility for early pay-in 21.4.2. Auto delivery out and 21.4.3. Client direct pay-out 22. Settlement of Transaction in case of Holidays 22.1. The Clearing Corporation shall clear and settle the trades on a sequential basis i.e., the pay-in and the pay-out of the first settlement shall be completed before the commencement of the pay-in and pay-out of the subsequent settlement(s). 22.2. The cash/EGR pay out from the first settlement shall be made available to the member for meeting his pay-in obligations for the subsequent settlement(s). 22.3. The Stock Exchanges/Clearing Corporati....