NEW DELHI: To keep pace with the changing market dynamics, markets regulator Securities and Exchange Board of India (SEBI) on Monday reviewed the margin framework for cash and derivatives segments, aiming to bring more efficiency in the risk management system.
“The framework, which has been prepared in consultation with the capital markets regulator’s Risk Management Review Committee, will come into effect from May 1 this year,” SEBI said in a circular. Margin, in market parlance, is the minimum fund or security an investor is required to pay to the stockbroker before executing a trade.
In respect of margin framework for derivatives, the regulator has reviewed its guidelines on volatility calculation, scan range on price as well as volatility, calendar spread charge on various products, the minimum charge on short options, extreme loss margin and margin on consolidated crystallised obligation.
Besides, there is a provision on additional margin for highly volatile stocks. “For securities with the intraday price movement of more than 10 per cent in the underlying market for three or more days in past one month, the minimum total margins shall be equal to the maximum intraday price movement of the security observed in the underlying market in last one month,” SEBI said. This would be continued till the monthly expiry date of derivative contracts that fall after completion of three months from date of levy, it added.
For securities with the intraday price movement of over 10 per cent in the underlying market for 10 or more days in past six months, the minimum total margins would be equal to the maximum intraday price movement of the security observed in the underlying market in the previous six months, the regulator said. It further said this will be continued till the monthly expiry date of derivative contracts that fall after completion of one year from the date of levy.
Vying for SEBI top post
As many as two dozen people, including two whole-time members of SEBI and serving and retired bureaucrats, have applied for the post of chairman of the markets regulator, reports said. The last date for applying for the post was February 10. The current SEBI chief Ajay Tyagi, whose term comes to an end this month, has not put in his application, reports said.