Initial margin

Initial margin shall be computed on an online real time basis, payable on all open positions of Clearing Members, up to client level, and shall be payable upfront by Clearing Members in accordance with the margin computation methodology adopted by MCCIL from time to time. Initial Margin shall include SPAN margins, premium margin, assignment margin and such other additional margins, that may be specified by the Clearing Corporation from time to time.

Computation of Initial Margin

Clearing Corporation shall adopt SPAN® (Standard Portfolio Analysis of Risk) system or any other system for the purpose of real time initial margin computation. Initial margin requirements shall be based on 99% value at risk over a one day time horizon. However, in the case of futures contracts, where it may not be possible to collect mark to market settlement, before the commencement of trading on the next day, the initial margin shall be scaled up by appropriate scale up factor. The methodology for computation of value at risk percentage shall be as per the recommendations of SEBI from time to time.

Positions shall be computed in the following manner for Initial margin requirement:

Calendar Spread Charge

In the case of futures and options contracts on individual securities, the margin on calendar spread positions shall be calculated on the basis of delta of the portfolio consisting of futures and options contracts in each month. A calendar spread position shall be granted calendar spread treatment till the expiry of the near month contract The calendar-spread margin shall be charged in addition to worst-scenario loss of the portfolio. The spread charge shall be 0.5% per month of spread on the far month contract subject to a minimum margin of 1% and a maximum margin of 3% on the far side of the spread with legs up to 1 year apart.

Short Option Minimum Charge: Stock Options

Short option minimum charge shall be equal to 7.5 % of the notional value of all short positions in options on individual stocks. Notional value, with respect to an option contract, shall be computed as the product of the short open position in that option contract multiplied by the previous day's closing price of the underlying security in the normal market of Capital Market Segment of the Exchange, or such other price as may be specified by the Clearing Corporation from time to time.

Net Option Value

The Net Option Value shall be the current market value of the option times the number of options (positive for long options and negative for short options) in the portfolio. Net option value will be deducted from the SPAN® Risk Amount.

As a risk containment measure, the relevant authority may require clearing members to make payment of additional margins as may be decided from time to time. This shall be in addition to the initial margin and exposure margin.

Clearing members shall deposit liquid assets as mentioned in Chapter VI to meet margin requirements. The margins shall be collected /adjusted from the liquid assets of a member on a real time basis.

The initial and exposure margin shall be payable upfront by the clearing members. Members are required to collect initial margins from their client/constituents on an upfront basis. It is mandatory for all clearing /trading members to report details of such margins collected to the Clearing Corporation. Amount of liquid net worth of a clearing member utilized towards exposure margins arising out of open positions of trading members/clients, clearing and settling through them, may be recovered from such trading members/clients.

Non-fulfillment of either the whole or part of the margin obligations shall be treated as a violation of the Rules, Bye-Laws and Regulations of the Clearing Corporation. The violation shall attract actions as specified under Client Margin Reporting. In addition and without prejudice to the foregoing, the MCCIL may, within such time as it may deem fit, advice the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of Clearing Member participants clearing through such clearing members, without any notice. MCCIL may, take additional measures like, imposing penalties, collecting appropriate deposits, invoking bank guarantees, encashment of fixed deposit receipts, realizing money by disposing off the securities and exercising such other risk containment measures as it deems fit and may further take such disciplinary action as it may deem fit and appropriate in this regard.

For the purpose of monitoring members who have high capital utilizations, the methodology as specified hereunder or such other methodology as may be specified by the relevant authority from time to time shall be adopted,

To enhance the risk management capabilities of the clearing / trading members and to avoid a situation of disablement, members are being provided an additional risk management facility - the Voluntary Close out. This facility enables clearing/trading members to voluntarily define a limit for margins/ positions beyond which all the orders would get risk managed. Clearing members desirous of availing the facility shall define limit for margins (upper limit) beyond which they shall move into Voluntary Close out mode and a limit (lower limit) below which they shall move out of Voluntary Close out mode. Similarly trading members desirous of availing the facility shall define separate limits for margins and positions (upper limit) beyond which they shall move into Voluntary Close out mode and a limit (lower limit) below which they shall move out of Voluntary Close out mode.