Initial Margin

Initial margin is payable on all open positions of Clearing Members, upto client level, and on an upfront basis by Clearing Members in accordance with the margin computation mechanism and/ or system.

a. Span Margin
Initial Margin includes SPAN margins and such other additional margins.

Clearing Corporation adopts the SPAN^® (Standard Portfolio Analysis of Risk) system for the purpose of real time initial margin computation.

Initial margin requirements are based on 99% value at risk over a one day time horizon. However, in the case of futures contracts, where it may not be possible to collect mark to market settlement, before the commencement of trading on the next day, the initial margin is computed over a two day time horizon by applying an appropriate statistical formula. The methodology for computation of value at risk percentage is as per the recommendations of SEBI from time to time.

Initial margin requirement:

1. For client positions – is netted at the level of individual client and grossed across all clients, at the trading/ clearing member level, without any set-offs between clients.
   
   
2. For proprietary positions – is netted at trading/ clearing member level without any set-offs between client and proprietary positions.

The margins so computed would be aggregated first at the trading member level and then aggregated at the clearing member level.


Updation of risk parameters
The risk parameters are updated 6 times in the day, based on the prices/yield at 11:00 a.m., 12:30 p.m., 2:00 p.m., 3:30 p.m. , end of the day and begin of the day. For the purpose of intra-day updation of 10 Year Notional Coupon bearing GOI security futures contract, the yield of the benchmark 10-Year security as published by FIMMDA, from the NDS Order Matching platform, and for 91-Day T-Bill Futures the previous day futures closing yield of 91 day GOI T-Bill futures will be used. Risk parameters generated based on the updated parameters are provided on the exchange website at (www.nseindia.com). Additional risk parameter file containing Interest Rate Futures and Currency futures contracts are provided in specific format.


b. Minimum Initial Margin
The minimum initial margin for 10 Year Notional Coupon bearing GOI security futures contract is 2.33% on the first day of Interest Rate Futures trading and 1.6 % thereafter, and for 91-Day T-Bill futures contracts minimum of 0.1% of the notional value of the futures contract on the first day of trading and 0.05% of the notional value of the futures contract thereafter (The notional value of the contract shall be Rs 200000) will be scaled up by look ahead period as may be specified by the Clearing Corporation from time to time.

c. Calendar Spread Margin for 91 Day T-Bill Futures contract
91 Day T-bills futures position at one maturity hedged by an offsetting position at a different maturity would be treated as a calendar spread position. Margin of Rs.100/- for spread of one month, Rs 150/- for spread of two months. Rs 200/- for spread of three months and Rs 250/- for spread of four months and beyond wiil be levied on such positions.

d. Futures Final Settlement Margin for 91 Day T-Bill Futures contract
Futures Final Settlement Margin is levied at the clearing member level in respect of the final settlement amount due. The final settlement margin is levied from the last trading day of the contract till the completion of pay-in towards the Final Settlement.

e. Delivery margins for 10 Year Notional Coupon bearing GOI security futures contract
Once the positions are intended for delivery and allocation has been done, the following margins are levied

1. Margin equal to VaR on the futures contract on the invoice price plus 5% on the face value of the security to be delivered
   
   
2. Mark to market loss based on the underlying closing price of the security intended for delivery.

The above margins are levied on both buyer and seller at a client level and aggregated at clearing member level. The margins are levied from the intention day and released on completion of the settlement. Positions for which EPI of securities is made are exempt from delivery margins.

f. Non-Intent Margins for 10 Year Notional Coupon bearing GOI security futures contract
In cases where the positions are open at end of last trading day and no intention to deliver has been received, the following margins are levied.

1. Margin equal to VaR on the futures contract on the invoice price of the costliest to deliver security from the deliverable basket plus 5% on the face value of the open positions
   
   
2. Mark to market loss based on the underlying closing price of the costliest to deliver security from the deliverable basket.

The above margins are levied on both buyer and seller at a client level and aggregated at clearing member level. The margins are levied from the last trading day till the day of receipt of intention to deliver, following which the margins on delivery positions are levied.

Extreme Loss Margin
Clearing members would be subjected to extreme loss margins in addition to initial margins. The applicable extreme loss margin would for 10 Year Notional Coupon bearing GOI security futures contract would be 0.3% of the value of the gross open positions of the futures contract and for 91-Day T-Bill Futures contracts will be 0.03% of the notional value (Rs 200000) of the contract for all gross open positions of the futures contract or as may be specified by the relevant authority from time to time.

In case of calendar spread positions in 91-Day GOI T-bill futures extreme loss margin will be 0.01% of the notional value (Rs 200000) of the far month contract. The relevant authority may specify levy of normal margins on calendar spread positions from time to time.

Extreme Loss margin requirement are computed as under:

1. For client positions - are netted at the level of individual client and grossed across all clients, at the trading/ clearing member level, without any set-offs between clients.
   
   
2. For proprietary positions - are netted at trading/ clearing member level without any set-offs between client and proprietary positions.

The margins so computed are aggregated first at the trading member level and then aggregated at the clearing member level.

Imposition of additional margins
As a risk containment measure, the Clearing Corporation may require clearing members to make payment of additional margins as may be decided from time to time. This is in addition to the initial margin and extreme loss margin, which are or may have been imposed from time to time.