SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, A Wing, Gr. Floor,
224, Nariman Point, Mumbai 400 021
SMDRP/Policy/Cir- 25/2000
29 June 2000
To,
The President/Executive Director/Managing Director Of all the Stock Exchanges
Dear Sir/Madam,
The Group on Risk Management for Equity Markets constituted by SEBI met on June 21, 2000, and the following decisions were taken:
A. Compulsory Rolling Settlement
Volatility Margin
The additional volatility margin shall not be applicable for scrips in the compulsory Rolling Settlement.
Price Bands
It was decided that the relaxation by 8% after the scrip has hit the initial price band of 8% would be applicable to all the scrips in the compulsory rolling settlement. The procedure for the relaxation of price bands would be same as prescribed in SEBI Circular No. SMDRP/Policy/Cir-19/2000 dated April 28, 2000.
These would be applicable for trading on or after July 3, 2000. B) Account Period Settlement
Volatility Margin
It was decided that volatility margins should be continued for the account period settlement. However, it was felt that the margin structure could be revised by reducing the number of slabs and also margin rates for these slabs. Accordingly, the revised structure would be as under :
i. Volatility margin would be applicable if volatility (six weekly(high-low)/low) exceeds 80% instead of of 60% prescribed earlier.
ii.The slabs for volatility margins and the margin rates would be as follows:
follows:
| Volatility | Percentage Margin |
| More than 80% upto 100% | 10% |
| More than 100% upto 150% | 15% |
| More than 150% | 25% |
iii. The new structure would be applicable from the account period commencing immediately after June 30, 2000.
Price Bands
As in the Compulsory Rolling Settlement the price bands for account period settlement have also been relaxed on similar lines for the identified 200 scrips.
This will be applicable for trading on or after July 3, 2000.
C) Withdrawal of Additional Margin on Sales
The 5% additional margin on scrip-wise net sale position at the end of the day was imposed w.e.f. April 26, 2000 stands withdrawn.
D) Encouragement for Delivery Based Transactions
If in respect of trades marked for delivery at the end of the day (to be certified by broker), the margins are secured by a bank guarantee from the investor in favour of the broker (along with back-to-back bank guarantee by broker in favour of the exchange) or in favour of the exchange. The exchange may not insist on any cash component in margins. The exchanges will workout the modalities for implementation of this decision.
The Exchanges are advised to take steps to give effect to the above decisions. Yours faithfully,
P. K. BINDLISH
Division Chief
Secondary Market, Depository, Research & Publications Department e-mail : pkb@sebi.gov.in
