SMDRPD/Policy/Cir-53/2000

November 15, 2000

The President/Executive Director/Managing Director Of all the Stock Exchanges

Dear Sir/Madam,

Sub:- Risk Containment measures for rolling settlement and CNS, CFRS & ALBRS

This is in continuance of the circular no. 25/2000 dated June 29, 2000 advising the Exchanges about the risk containment measures applicable to the Rolling settlement, circular no. 43 of 2000 advising the features of the Continuos Net Settlement(CNS), Carry Forward in Rolling Settlement(CFRS) and the Automated Lending and Borrowing in the Rolling Settlement (ALBRS) and circular No. 5 1/2000 dated November 06,2000 advising the introduction of CNS, CFRS and ALBRS in 15 scrips.

Pursuant to the discussions and the decisions of the Group on Risk Management in Equity Markets the following are the risk containment measures for the rolling settlement and for the products of CNS, CFRS and the ALBRS

1. Calculation of Gross Exposure :

The gross exposure would be aggregate of all the open position of the member outstanding on that day. Thus the gross exposure as at the end of day T would be the net of the following: The net of the outstanding positions of the previous four trading days,

The outstanding position created on day T,

The net outstanding position of the future 5 settlements.

1. Gross Exposure Margin :

The gross exposure margin would be calculated on the worst case scenerio i.e. highest net outstanding position at the end of any trading day for which the settlement has not been concluded.

2.  Mark to Market Margin :

Mark to Market margin would be applicable as in the account period settlement system. 3.  Scrip limits in CFRS and ALBRS :

The present limit of Rs. 5 crore per scrip for a member would be applicable to the scrips in CFRS and ALBRS.

4. Member-wise CFRS and ALBRS limit :

The present limit of Rs. 40 crores would continue to apply as an aggregate exposure of account period and rolling settlement deferrals.

5. CFRS and ALBRS Margin :

The same margins as are applicable in the account period settlement would continue in the rolling settlement.

6. Incremental CFRS and ALBRS Margin :

The T-2 open deferral positions at the three exchanges of BSE, CSE and the NSE would be shared and consolidated positions would be considered for announcement of the scrips attracting the incremental CFRS and ALBRS margin on T+1 day.

7. Margins on CNS:

The margin structure as applicable for the CFRS and the ALBRS would also apply to the CNS positions of the member. It is to be noted that the margin thus leviable would be applicable only on the sell side and not on the buy side of the position.

The Exchanges are advised to adhere to the risk containment measures as mentioned above for rolling settlement and for the introduction of CNS, CFRS and ALBRS.

Thanking you, Yours faithfully

P K Bindlish

Division Chief

Secondary Market Depository,

Research & Publications Department e-mail : pkb@sebi.gov.in

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