The Securities and Exchange Board of India vide in its Circular dated 24th February 2020 has reviewed the margin framework for cash and derivatives segments, in order to bring more efficiency in the risk management system. This notification shall be effective from 1st May 2020.
Key Highlights:
The following changes has been made to the existing risk management framework.
- SEBI, on the basis of liquidity, has created three groups/categories in the margin framework for cash market and has provided the Value at Risk Margin framework for each group.
- Under the margin framework for derivatives, SEBI has reviewed on volatility calculation, scan range on price and volatility, calendar spread charge, minimum charge on short option, extreme loss margin and margin on consolidated crystallized obligation.
- For securities with the intra-day price movement of more than 10% in the underlying market for more than 3 days in last one month, the minimum total margins shall be equal to the maximum intra-day price movement of the security observed in the underlying market in last one month. The same shall be continued till monthly expiry date of derivative contracts which falls after completion of three months from date of levy.
- Further for securities with intra-day price movement of over 10 % in the underlying market for 10 or more days in past six months, the minimum total margins would be equal to the maximum intra-day price movement of the security observed in the underlying market in the previous six months.
Click here to read the Notification.
