Stock exchanges have robust risk management framework in place: SEBI

The Securities and Exchange Board of India (SEBI) and stock exchanges have a robust risk management framework in place which automatically gets triggered in response to movements in the indices, the market regulator said on Friday.

The framework tracks movements in BSE Sensex and NSE Nifty as well as individual stocks both in cash and derivatives market, it said in a statement.

Some of these measures include value at risk (VaR) margin with initial margin to cover 99 per cent risk of a transaction, extreme loss margin (ELM) to cover the residual risk of a transaction, collection of mark to market losses on daily basis, additional surveillance margins based on stress tests, circuit filters at index levels, circuit filters at stock levels, action on the basis of surveillance inputs, and regular follow up by the clearing corporations with clearing members for collection of margin and pay-in obligations.

 

"The positions of margin payments, margin utilisation, adequacy of collaterals (securities deposited by brokers with the clearing corporations) and pay-in obligations being met by clearing members (brokers) are being continuously monitored," said SEBI.

"Similarly, the settlement and clearance of trades are also being constantly monitored. SEBI and stock exchanges are prepared to take suitable actions as may be required," it added.

The SEBI's statement followed as the Indian stock market has been moving over the past few days in tandem with other global markets owing to concerns relating to COVID-19 pandemic, resultant fear of economic slowdown and recent fall in global crude prices.

It said the fall in Indian indices has been significantly lower than stock markets in other countries.

SEBI said the closing index in on January 31 was down by 19.83 per cent for Nifty 50 and 19.51 per cent for Sensex 30 compared to 36.30 per cent in Russia, 30.35 per cent in France, 29.43 per cent in Germany, 28.12 per cent in Britain, 24.97 per cent in the Dow Jones Industrial Average and 21.3 per cent in Nasdaq (both the United States) and 20.02 per cent in Japan.

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