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Sebi lays down more robust risk management framework for equity derivatives

Now, the payment of mark to market margin (MTM) would mandatorily be made by all the members on T+0 basis -- before start of trading on the next day, as per a circular.

December 17, 2018 / 21:52 IST
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Regulator Sebi on Monday put in place a more robust risk management framework with regard to margin system for the equity derivatives segment. The framework has been prepared on the basis of recommendation by Sebi's Risk Management Review Committee.

Now, the payment of mark to market margin (MTM) would mandatorily be made by all the members on T+0 basis -- before start of trading on the next day, as per a circular.

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Currently, stock exchanges and clearing corporations offer a choice to the trading members to opt for payment of MTM either before the start of trading on the next day (T+0) or on the next day (T+1). This would be with scaled up margins to cover the potential for losses over the time elapsed in the collection of MTM.

To bring Margin Period of Risk (MPOR) in greater conformity with the principles for financial market infrastructures, Sebi has increased the margin period of risk to two days from one day at present.