SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021
The President/Executive Director/ Managing Director Of all the Stock Exchanges
Pursuant to the discussions in the meeting of the Group on Risk Management in Equity Markets held on January 31, 2001, the stock exchanges are advised to implement the following :
1.Automated Lending and Borrowing Mechanism (ALBM)
Vide circular no. SMDRP/POLICY/CIR-31/2000 dated July 27, 2000, an option was given to the pure securities borrower of withdrawal of shares from the clearing house/clearing corporation, subject to margins. This option is being withdrawn w.e.f. the next settlement following date of this circular and the shares borrowed under this facility shall be retained with the clearing corporation or clearing house of the exchange.
2.System for Gross Margining at the sub-broker level
With effect from February 28, 2001, the sub-brokers will mandatorily provide the client code number while acting on behalf of clients at the order entry level and the exchanges will ensure the same.
3.Continuous Net Settlement (CNS)
Vide circular no. SMDRP/POLICY/CIR-51/2000 dated November 6, 2000, it was provided that the facilities of CNS would be provided in 15 scrips mentioned in that circular. It has now been decided that the CNS facility would also be available in voluntary rolling settlement segment of the stock exchanges in all the scrips which are having facility of ALBM/MCFS in those stock exchanges in the account period settlement.
4.Scrips eligibility for ALBM/MCFS
For the eligibility of the scrips for the facility of ALBM/MCFS, the exchanges shall henceforth ensure that the scrip satisfies all the three parameters mentioned below :
The scrips must have a minimum market capitalisation of Rs. 200 crores. The scrips which are currently in the ALBM or MCFS in any of the exchanges would however continue to be eligible for this facility even though the market capitalisation is now less than Rs. 200 crores. However, in subsequent review, these scrips would have to qualify on criteria other than market capitalisation.
For the purpose of liquidity, the scrips shall satisfy either all the following four parameters or the parameter of impact cost.
a. Trading Volume – average trading volume in the scrip in the last six months should be among the top 75% of the above universe meeting the market capitalisation criterion.
b. Number of Trades – average number of trades should be among the top 75% of the trading above universe meeting market capitalisation criterion.
c.Trading Frequency – the scrip should have been traded on at least 75% of the trading days in the last 6 months.
d.Velocity of Trades – the scrip should have been among the top 75% in terms of number of shares traded as a percentage of the total number of shares traded as a percentage of the total number of shares in the equity capital of the company for at least six months.
Liquidity based on impact cost
Impact cost must be less than 2.5%. The procedure for computation of impact cost is enclosed as ‘Annexure’ Floating StockThe minimum floating stock criteria should be applied as under: at least 25% of the company’s equity capital must be held by non-promotersin case, the non-promoter holding is less than 25%, the market capitalisation of non-promoter holding of the company’s capital should be at least Rs.100 crores subject to a minimum non-promoter holding of 10% of paid up capital.
Non-promoter holding shall be as provided in our circular No. SMDRP/POLICY/CIR-7/2001 dated February 1, 2001 .
The list of scrips so eligible would be reviewed every six months.Mark to Market Margin in Rolling Settlement
Vide circular no. SMDRP/Policy/CIR-53/2000 dated November 15, 2000, it was provided that the mark to market margin in rolling settlement would be applicable as in the account period settlement system. It has now been decided that the mark-to-market profits and losses across the settlements for which the positions are unsettled would be permitted to be netted off.
Collection of Margins All the margins prescribed by SEBI shall be collected on T+1 basis.Bank Guarantee towards Base Minimum Capital (BMC)
The stock exchanges may take their own decisions regarding tenure of bank guarantees deposited by members towards BMC.
P. K. BINDLISH
DEPUTY GENERAL MANAGER,
SECONDARY MARKET DEPOSITORY,
RESEARCH & PUBLICATIONS DEPARTMENT
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