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TMI BlogRisk Management for T+2 rolling settlementX X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 1% shall be categorised under Group I and the scrips where the impact cost is more than 1, shall be categorised under Group II. 4. The remaining stocks wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures 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 scaled up by root 3. 10. For the purposes of determining the margins for Group II & Group III, the minimum Index VaR would continue to be taken as 5% as at present. 11. The volatility estimates for the scrips and the index for the VaR shall be computed on the price differential of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xchanges 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 well before the above deadline to avoid any problems in the live environment. While the above risk management measures is expected to contain risk in the system, however, the efficacy of the same would be dependent on monitoring, surveillance and timely collection of margin by the stock exchanges. For the risk containment measures to be successful, the exchanges must continue to strengthen their monitoring and surveillance of broker posi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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