As Sebi brings in a new risk management regime in capital markets from next week, top bourse NSE today said its clearing corporation arm will take contributions from members for the new core Settlement Guarantee Fund (SGF).
The contribution would be different for different segments and would be taken from the free collateral already provided by the clearing members.
Besides a minimum contribution, which would be Rs one lakh in capital markets segment, there will also be a dynamic contribution for clearing members. This would depend on risk assessment, while NSE has also created a scoring model as per collateral quality, settlement value and open interest.
The minimum contribution will be Rs 10 lakh for F&O segment, Rs 2 lakh for currency derivatives, but no contribution would be collected from clearing members in the debt segment towards the core SGF.
The contribution can be made through fixed deposits and in case of fixed deposits not being available, NSCCL (National Securities Clearing Corporation Ltd) will temporarily earmark cash deposits towards the core SGF contribution.
The minimum contribution will be required to be made available before December 1, 2014, NSE said in a circular for capital markets segment, while asking members to ensure availability of sufficient deposits in the form of bank fixed deposits or cash, as earmarking of collateral towards core SGF contribution may result in shortfall in margin.
"NSCCL shall fulfil the dynamic contribution requirement on behalf of clearing members by the end of February 2015. The dynamic contribution requirement for the month of March 2015, if any, shall be intimated to members by February 13, 2015,'t it said, while adding that members would need to provide dynamic contribution on or before February 27, 2015.
"In case there is failure on part of clearing members to bring in their requisite contribution to Core SGF, NSCCL will ask the exchange to withdraw the trading facility of trading members and/or withdraw clearing facility of custodial participants clearing through such members/custodians, until such members replenish their contribution," the circular said.
"Further penalty as applicable for margin shortfall may be levied to the clearing members," it added.
To safeguard stock markets from any systemic risks arising out of trade and payment defaults, regulator Sebi is bringing in a new regulatory regime from December 1 to ensure timely payment settlements and to keep the systems robust by way of daily 'stress tests'.
The new mechanism is aimed at mitigating risks faced by overall markets due to defaults by certain entities and would also include setting 'default waterfall' marks to limit the liability of non-defaulting entities.
The stress testing norms will also capture the risk posed due to possible default in institutional trades, as per the new guidelines.
