Risk Management for T+2 rolling settlement

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..... ion of the margining structure in the shortened T+2 rolling settlement. The Group held various meetings and pursuant 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 .....

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..... and relevant data shall be made available to the public at large through the website of the Exchanges. Any change in the methodology for the computation of impact cost would also be disseminated by the Exchange. Risk containment measures 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 s .....

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..... based either on BSE Sensex or S P CNX Nifty and would be disseminated by the BSE and NSE daily on .their websites by 6:30 pm in a downloadable format. 18. Other stock exchanges could make their own VaR calculations or freely adopt the VaR calculations available on the sites of BSE and NSE. It will be mandatory for BSE/NSE to provide real time Sensex/Nifty/scrip data free. It will also be mandatory for all the stock exchanges to have real time information of Sensex/Nifty/ scrip data either from the respective exchange or through a vendor. The stock exchanges should ensure that the above margin structure is implemented on April 01, 2003 and the exchanges have tested the software and remove any glitches in its operation .....

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