Decisions of Group on Risk Management for Equity Markets regarding Volatility Margin, Price Bands, and Additional Margin
Summary
SEBI issued a circular on June 29, 2000, detailing decisions from the Group on Risk Management for Equity Markets regarding margin and price band regulations. The document outlines specific changes for compulsory rolling settlement, account period settlement, and the withdrawal of additional margins on sales. It also introduces incentives for delivery-based transactions by allowing bank guarantees to replace cash components in margins.
Text
The additional volatility margin shall not be applicable for scrips in the compulsory Rolling Settlement.
The relaxation by 8% after the scrip has hit the initial price band of 8% would be applicable to all the scrips in the compulsory rolling settlement.
Volatility margin would be applicable if volatility (six weekly(high-low)/low) exceeds 80% instead of of 60% prescribed earlier.
The slabs for volatility margins and the margin rates would be as follows: More than 80% upto 100% - 10%; More than 100% upto 150% - 15%; More than 150% - 25%.
The new structure would be applicable from the account period commencing immediately after June 30, 2000.
As in the Compulsory Rolling Settlement the price bands for account period settlement have also been relaxed on similar lines for the identified 200 scrips.
The 5% additional margin on scrip-wise net sale position at the end of the day was imposed w.e.f. April 26, 2000 stands withdrawn.
If in respect of trades marked for delivery... the margins are secured by a bank guarantee... The exchange may not insist on any cash component in margins.
Source: SecMarx — Decisions of Group on Risk Management for Equity Markets regarding Volatility Margin, Price Bands, and Additional Margin. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.