Framework to Enable Verification of Upfront Collection of Margins from Clients in Cash and Derivatives segments
Summary
This circular establishes a framework for the regular monitoring and verification of upfront margin collection from clients in cash and derivatives segments. It mandates that Stock Exchanges and Clearing Corporations implement systems to verify margin availability and levy penalties for short-collection or non-collection. The provisions come into effect on December 1, 2020, following a phased adoption period for peak margin obligations.
Text
Stock Exchanges/ Clearing Corporations shall adopt the framework specified in the Annexure for the purpose of ‘Mechanism for regular monitoring of and penalty for short-collection/ non-collection of margins from clients’ in Cash and Derivatives segments.
The applicable upfront margins are required to be collected from the clients in advance of the trade.
The provisions of this Circular shall come into effect from December 01, 2020.
Stock Exchanges and Clearing Corporations are directed to take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations.
Stock Exchanges and Clearing Corporations are directed to bring the provisions of this circular to the notice of their members and also disseminate the same on their websites.
Stock Exchanges and Clearing Corporations are directed to communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Development Report.
Clearing Corporations shall send minimum 4 snapshots of client wise margin requirement to TMs/CMs for them to know the intraday margin requirement per client in each segment.
The member shall have to report the margin collected from each client, as at EOD and peak margin collected during the day.
The verification of availability of margins with TM/ CM shall be done by exchanges/ clearing corporations on a weekly basis by verification of the balances in the books/ ledgers of the TM/ CM in respect of the client.
The peak margin obligation of client across snapshots shall be adopted in a phased manner starting with 25% in Phase 1, increasing to 50%, 75%, and finally 100% in subsequent phases.
Source: SecMarx — Framework to Enable Verification of Upfront Collection of Margins from Clients in Cash and Derivatives segments. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.