**Summary:**
SEBI Circular SEBI/HOM/MRD/TPD/P/CIR/2024/24, issued on April 23, 2024, by Ansuman Dev Pradhan, Deputy General Manager, Market Regulation Department, extends cross-margin benefits for offsetting positions in correlated equity indices and index/constituent stock futures with different expiry dates. This circular amends Chapter 5 of the SEBI Master Circular dated October 16, 2023.
Key changes include:
* A spread margin of 4% will be levied on offsetting positions in correlated indices with different expiry dates, while the existing 3% spread margin remains for positions with the same expiry date.
* A spread margin of 3.5% will be levied on offsetting positions of an index and its constituents with differing expiry dates, provided all constituent futures contracts have the same expiry date. The existing 2.5% spread margin applies when the index and constituents expire on the same date.
* The spread margin benefit will be revoked at the start of the expiry day of the earlier expiring instrument.
* Stock Exchanges and Clearing Corporations are required to implement monitoring mechanisms for cross-margin activities.
* All other existing cross-margin requirements remain applicable.
This circular is issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect investor interests and regulate the securities market. It will take effect three months from the date of issuance.
Contact: Ansuman Dev Pradhan, Deputy General Manager, Technology, Process Reengineering, Data Analytics, Market Regulation Department. Phone: 91 22 26449622. Email: ansumanp@sebi.gov.in.
Key Entities Referenced
SEBI: Securities and Exchange Board of India, the regulatory body for securities markets in India.
Stock Exchanges: All stock exchanges regulated by SEBI.
Clearing Corporations: All clearing corporations except commodity derivatives exchanges clearing corporations.
SEBI Master Circular dated October 16, 2023: A key policy document issued by SEBI which stipulates guidelines for stock exchanges and clearing corporations.
Risk Management Review Committee of SEBI: A committee within SEBI responsible for reviewing risk management practices.
Securities and Exchange Board of India Act, 1992: The legislation that established SEBI and grants it powers to regulate the securities market.
Cross Margin: Benefits for offsetting positions having different expiry dates
Ansuman Dev Pradhan: Deputy General Manager, Technology, Process Reengineering, Data Analytics, Market Regulation Department at SEBI.
CIRCULAR
SEBI/HO/MRD/TPD-1/P/CIR/2024/24 April 23, 2024
To
All Stock Exchanges
All Clearing Corporations
(Except Commodity Derivatives Exchanges/Clearing Corporations)
Sir/Madam,
Cross Margin benefits for offsetting positions having different expiry dates
1. Chapter 5 of SEBI Master Circular dated October 16, 2023 for Stock Exchanges
and Clearing Corporations inter-alia provides stipulations for cross margin
between index futures position and constituent stock futures position in
derivatives segment (Clause 1.2.9) as well as cross margin in respect of
offsetting positions in correlated equity indices (Clause 1.2.10). At present, the
aforesaid cross margin benefits are provided if both the correlated indices or an
index and its constituents, as the case may be, have same expiry day.
2. In discussion with stock exchanges, Clearing Corporations and Risk
Management Review Committee of SEBI, it has been decided to extend the
cross margin benefit on offsetting positions having different expiry dates subject
to the following :
a. A spread margin of 40% would be levied in case of offsetting positions
in correlated indices having different expiry dates. Spread margin of 30%
would continue to get levied in case of same expiry date (i.e. existing
requirement).
b. A spread margin of 35% would be levied in case of offsetting positions
in index and its constituents having expiry date different from index.
While the expiry date of index futures can be different from that of itsconstituents, the expiry date of futures contracts of all constituents
should be same in order to obtain the aforesaid cross margin benefit.
Further, spread margin of 25% would continue to get levied in case of
same expiry date of index and constituents (i.e. existing requirement).
c. The aforesaid spread margin benefit would be revoked at the beginning
of the expiry day of the position which expires first (i.e. first of the expiring
indices or constituents) in case the expiry dates of both legs of the
position are different.
d. Exchanges / Clearing Corporations to put in place suitable monitoring
mechanism to keep track of cross margin activities of participants.
e. All other requirements pertaining to cross margin remain unchanged and
applicable.
3. The circular would be effective three months from its date of issuance. The
circular is being issued in exercise of powers conferred under Section 11 (1) of
the Securities and Exchange Board of India Act, 1992 to protect the interests
of investors in securities and to promote the development of, and to regulate
the securities market.
Yours faithfully,
Ansuman Dev Pradhan
Deputy General Manager
Technology, Process Re-engineering, Data Analytics
Market Regulation Department
+91-22-26449622 Email: ansumanp@sebi.gov.in