One of the reasons identified for the recent
crash of stock market was futures contract. While some immediate
steps were taken to avoid free-fall, the efforts are still going on
to avoid such mishaps in the future. The steps taken to consolidate
futures market include:
POSITION LIMITS FOR FUTURES MARKET
The earlier decision that member's exposure in
Futures Contract in a scrip, should not exceed 10% of the Free-Float
of such scrip, is withdrawn. The new decision in this respect is,
such exposure shall not exceed 1% of the Free-Float or the number of
shares (whichever is higher), being determined by a slab. Such slab
will be developed by the Exchange, while considering the price
factor and Free-Float of every scrip available in Futures Market.
This measure will be implemented from May 2005 Futures Contract. The
Brokers, in the similar manner, shall also impose exposure limits on
each of their client.
NETTING SHOULD NOT BE ALLOWED IN READY &
FUTURES MARKET FOR THE PURPOSE OF CAPITAL ADEQUACY
From April 04, 2005, for the purpose of
calculation of Capital Adequacy, netting shall not be allowed
between the Exposures of Ready & Futures Market.
COLLECTION OF LOSS MARGIN IN FUTURES MARKET ON
It is decided that mark-to-market losses, of the
members having exposures of more than 200 million, in the Futures
Market, shall be collected twice in a day. This measure will be
implemented from May 2005 Futures Contract.
PERCENTAGE OF INITIAL MARGIN IN READY MARKET
SHOULD BE COLLECTED IN CASH
It is decided that 33.33% (one-third) margins
against exposure and mark-to-market losses in Ready Market, should
be collected in cash from June 2005. Moreover, the Exchange shall
pay return to the members on all cash margins and a proposal in this
respect be placed before the Board in May, 2005.
UNIQUE/GLOBAL CLIENT IDENTIFICATION
This mechanism shall be developed by CDC and
implemented by November 30, 2005.
COLLECTION OF GROSS MARGIN
Collection of Gross Margin i.e. margins based on
client level netting shall be implemented by December 31, 2005.
INTRODUCTION OF CONCENTRATION MARGINS
Concentration Margins shall be introduced in July
MARGINS BASED ON VOLATILITY & LIQUIDITY
Margins mechanism based on volatility &
liquidity shall be implemented by the end of September 2005.
Existing Risk Management system shall be reviewed by an independent
consultant and Risk Management Manual shall be developed by the end
of November, 2005.
COLLECTION OF MARGINS 100% IN CASH BEYOND RS200
From May, 2005 Futures Contract, deposits against
exposures exceeding Rs200 million shall be collected in cash.
Moreover, the existing slab in Futures Market, for margin
collection, revised as under:
OF CAPITAL ADEQUACY IN FUTURES MARKET
Up to Rs100 million
10% of the exposure amount
(50% cash + 50 % in approved securities)
Over Rs100 million up to Rs200 million
Rs10 million plus 12.5% of the amount
exceeding Rs100 million (50% cash + 50% in approved
Over Rs200 million up to Rs300 million
Rs22.5 million plus 22.5% of the amount
exceeding Rs200 million (100% cash)
Over Rs300 million
Rs45 million plus 30% of the amount
exceeding Rs300 million (100% cash)
Total Exposure of a member in Futures Market
should not exceed 10 times of the Net Capital Balance, from May 2005
Futures Contract. However, the overall total Capital Adequacy of a
member shall remain 25 times of Net Capital Balance of such member.
FUTURES MARKET - FROM DELIVERABLE TO
With effect from July, 2005 Futures Contract,
Futures Market shall be 'Cash-Settled' only. The striking price
(settlement price) shall be determined by a pre-close session, to be
developed by the Exchange, similar to its existing pre-open session.
Moreover, from July, 2005 Futures Contract, three contracts of 30
days, 60 days and 90 days shall be opened simultaneously.
CHANGE IN THE CIRCUIT BREAKERS
From the date of opening of May, 2005 Futures
Contract, Circuit Breakers in Ready and Futures Market shall be
— Upper Limit 5% or Re1, whichever is higher
— Lower Limit 5% or Re1, whichever is higher
ORDERS IN PRE-OPEN COULD NOT BE CHANGED
From April 4, 2005, no editing or deletion of
orders (either Bid or Offer) shall be allowed, in the Pre-open
session. However, new orders shall continue to be accepted by the
REMOVAL OF CIRCUIT BREAKERS AND SHIFTING A SCRIP
It was agreed that an exit option be developed,
whereby a scrip which is stuck up at the Circuit Breaker (either in
Ready or Futures Market), twice in a day, for certain period of
time, shall be shifted over to T+1 from T+3 in Ready Market. Whereas
its treatment in Futures Market and the remaining parameters once
developed, will be notified at the earliest, so that the same could
be implemented from May, 2005 Futures Contract.
ELIGIBILITY OF A SCRIP IN FUTURES MARKET
From May, 2005 Futures Contract; no scrip shall
qualify for Futures Market unless its Free-Float is 100 million or
more. Moreover, the number of contracts opened (Open Interest) in a
scrip, shall not exceed the Free-Float of such scrip. Open Interest
means sum of net buy and net sell (outstanding position) of all
members, operating in such scrip.