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Liquid Assets


Clearing members are required to provide liquid assets which adequately cover various margins and liquid net worth requirements. A clearing member may deposit liquid assets in the form of cash, bank guarantees, fixed deposit receipts, approved securities and any other form of collateral as may be prescribed from time to time. The total liquid assets comprise of the cash component and the non cash component wherein the cash component shall be at least 50% of liquid assets.

In pursuance of Rule 2.3 of Chapter IV of the Rules of the Clearing Corporation, details of security deposit to be maintained as Liquid Networth are specified as under:

Liquid Networth shall be computed as total liquid assets less initial margin payable at any point in time. The clearing member shall meet with the liquid networth requirements prescribed by the Clearing Corporation at all points of time.

  • Minimum liquid networth requirement for clearing members:

    Every clearing member of the Clearing Corporation is required to maintain a minimum liquid networth of Rs.50 lakhs with the Clearing Corporation in the following manner:
    (a) Rs.25 lakhs in the form of cash and
    (b) Rs.25 lakhs in any one or combination of the forms of collaterals accepted towards liquid assets.

  • Clearing member deposit for trading members whose deals they clear and settle:

    In addition to the requirements specified above every clearing member is required to maintain a deposit of Rs.10 lakhs each, in respect of every trading member whose deals such clearing members undertake to clear and settle, in the following manner:
    (1) Rs.2 lakhs to be maintained in the form of cash.
    (2) Rs.8 lakhs to be maintained in any one or combination of the forms of collaterals accepted towards liquid assets.

Non-fulfilment of Security Deposit Requirements

Any failure on the part of a clearing member to meet with the deposit requirements as given above in point number 1 and 2, at any point of time, will be treated as a violation of the Rules, Bye-Laws and Regulations of the Clearing Corporation. In such case the clearing corporation may initiate suitable action as given below or as prescribed by the relevant authority from time to time.

  • If the security deposit shortage is equal to or greater than Rs. 5.00 lakhs, the Clearing Corporation may advise the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of custodial participants clearing through such clearing members.
  • If the security deposit shortage is less than Rs. 5.00 lakhs, the member would be given one calendar week's time to replenish the shortage and if the same is not done within this timeframe, Clearing Corporation may advise the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of custodial participants clearing through such clearing members.

In addition, the outstanding positions of such clearing member and/ or trading members and/ or constituents, clearing and settling through such clearing member, may be closed out forthwith or any time thereafter by the Exchange, at the discretion of the Clearing Corporation, to the extent possible, by placing at the Exchange, counter orders in respect of the outstanding position of such clearing member without any notice to the clearing member and/ or trading members and/ or constituents, and such action shall be final and binding on the clearing member and/ or trading members and/ or constituents. Clearing Corporation may also initiate such other risk containment measures as it deems fit with respect to the open positions of the clearing member and/ or trading members and / or constituents.

Clearing Corporation may, in addition to the foregoing provisions, take additional measures like, imposing penalties, collecting appropriate deposits, invoking bank guarantees/ fixed deposit receipts, realising money by disposing off the securities and exercising such other risk containment measures as it deems fit and may further take such disciplinary action as it may deem fit and appropriate in this regard.

Clearing members are permitted to pledge shares of Liquid (Group I) Equity Shares as per Capital Market Segment and units of mutual fund as communicated to the members from time to time in electronic form ('demat securities') in the designated depository accounts maintained with the approved custodians in this regard. These securities shall be pledged in favour of National Securities Clearing Corporation Limited. A deed of pledge is required to be executed with the custodian in specified formats. The Clearing Corporation may revise the list of approved securities and the haircuts from time to time. Clearing Members who have deposited securities which have been discontinued from the list of approved securities, shall be required to take due care to replace such securities.

Valuation

The securities are valued on a daily basis based on the closing price of the security in the Capital Market segment of the National Stock Exchange of India Ltd. The haircut applicable for the security shall be as specified in the monthly circular for approved list of securities. This haircut shall be applied on the value of the securities provided by the clearing members to arrive at the net value of the securities. Only the value net of applicable haircuts shall be considered as the value of the securities pledged. Valuation of securities shall be done by the approved custodians at such periodic intervals as may be specified by the Clearing Corporation from time to time.

Foreign Sovereign Securities as Collateral

Clearing members may collect Foreign Sovereign Securities as collateral from Foreign Institutional Investors (FIIs) for Exchange Traded Derivative Transactions and provide the same as collateral to the Clearing Corporation. The methodologies for acceptance of foreign sovereign securities shall be as under:

  • Only US Government securities with 'AAA' rating shall be eligible to be provided as collateral.
  • The clearing members shall pledge the securities in favour of the Clearing Corporation through the approved custodian. For this purpose the clearing member shall be required to open account with the approved custodians. Currently, Deutsche Bank, New York has been designated as approved custodians for acceptance of foreign sovereign securities. The clearing members are required to contact Deutsche Bank for opening of necessary accounts.
  • The clearing members shall be required to execute the following agreements before providing foreign sovereign securities as collaterals to the Clearing Corporation
    1. Clearing member- NSE Clearing agreement
    2. Clearing member-FII agreement
    3. Indian Deed of pledge in favour of NSE Clearing
    4. New York Collateral
    5. Account control agreement
  • In respect of FII clients who shall be providing foreign sovereign securities the clearing member shall be required to execute the revised Clearing Member-Constituent agreement
  • The foreign sovereign securities shall be valued on a daily basis and converted into rupee terms based on the latest available RBI reference rate or such other rate as specified by the Clearing Corporation from time to time.
  • A hair cut of 20% or such other hair cut as specified by the Clearing Corporation from time to time shall be applied on the value of foreign securities pledged by the clearing members. The net value after applying the hair cut shall be added to the cash component of the liquid assets of the clearing member
  • The net value of foreign sovereign securities shall not exceed 10% of the total value of the cash component of the liquid assets of the clearing member.
  • The clearing member may request for release of foreign sovereign securities to the Clearing Corporation as per the format.

Clearing Members may submit deposit in the form of cash by making the required amount available in their respective clearing bank account and sending an authorization to the Clearing Corporation for debiting the said amount from their clearing account. The same can be provided through a web based facility called Collateral Interface for Members (CIM) which enables the clearing members to log in through internet. Members shall log in through specific user-ids and passwords into CIM. The benefit of such cash deposit requests shall be subject to bank confirmation from the respective clearing bank. To obtain a Login User ID, members are required to send their request to the Clearing Corporation in the format provided.

A clearing member who has authorised the Clearing Corporation to debit his clearing account as above shall ensure due performance of the commitment. Non-fulfilment of such obligation will be treated as a violation and/ or non-performance of obligations and shall attract consequences, penalty and/ or penal charges as applicable to violations.

Transfer of Cash from one segment to another segment

Clearing members who intend to transfer Cash from one segment to another segment can transfer the same by putting a transfer request in Collateral Interface for Member (CIM) on an intraday basis. Members shall be required to specify the segment where the collateral is to be transferred. Transfer request received from the members via CIM shall be treated as request from the members and no separate transfer letter needs to be submitted.

Clearing members are permitted to submit fixed deposit receipts as collateral towards liquid assets. The FDR should be issued either in favour of: "Custodian Name" (as the case may be) - A/c Clearing Member Name" in case to be deposited with approved custodians namely HDFC Bank Ltd., Stock Holding Corporation of India Limited and ICICI Bank Ltd or "NSE Clearing A/c Clearing Member Name" in case to be deposited with the Clearing Corporation.

Clearing members need to ensure following before submitting FDRs to approved custodians or NSE Clearing as the case may be:

  • Clearing members have to issue a letter to NSE Clearing/approved custodians as per the formats specified.
  • Clearing members have to submit a letter given by approved banks issuing the FDR to NSE Clearing/ approved custodians as per formats specified.
  • The FDR should have validity for a minimum period of 3 months in case of margin deposit and for a minimum period of 12 months in case of security deposit.
  • The minimum value of FDR that may be accepted is Rs.1 lakhs.
  • The FDR should be issued by any of the branches of approved banks and should be payable in the cities of: Mumbai, New Delhi, Chennai, Kolkata, Ahmedabad and Hyderabad.

 

Reminder letters

Reminder letters are downloaded on a monthly basis through the extranet in respect of the Fixed deposits those are due for renewal in the following month. Path for the letter is FAOFTP/F/LETTERS/DNLD. Further, the file naming convention for the same is F_REMINDERS_MEMBER CODE_DDMMYYYY.LIS.

Renewal letters

Renewals of the FDRs are the sole responsibility of the clearing members. In case of renewal of FDRs, the clearing members are required to furnish the renewal documents strictly in the prescribed formats.

Shifting of FDR from Capital Market/Currency Derivatives segment to F&O segment

Clearing member who intend to transfer the FDR from one segment to another segment can transfer the same by putting a transfer request in Collateral Interface for Member (CIM) on an intraday basis. Members shall be required to specify the segment where the FDR is to be transferred. Transfer request received from the members via CIM shall be treated as request from the members and no separate transfer letter needs to be submitted.

Clearing Members may opt for giving bank guarantee in the specified formats (Annexure I ), either for specific segment or for any of the clearing segment , from any approved banks towards liquid assets. Additionally, at the time of deposit of the bank guarantee, the clearing member is required to ensure the following:

  • The bank guarantee is strictly as per the formats prescribed by the clearing corporation.
  • A bank guarantee for security deposit should be issued for a minimum period of 12 months with a specific claim period of at least 3 months. However, where an issuing bank does not provide for a specific claim period beyond the expiry date in the bank guarantee, the clearing members shall submit a bank guarantee for a minimum period of 15 months. The maturity period of such bank guarantee shall be reduced by 3 months, which would be considered as the claim period of the bank guarantee.
  • A bank guarantee for margin deposit should have validity for a minimum period of 3 months. In case the issuing bank does not provide for a specific claim period beyond the expiry date in the bank guarantee, the maturity period of such bank guarantee shall be reduced by 7 days, which would be considered as the claim period of the bank guarantee.
  • In case bank guarantee is for any clearing segment then in such cases clearing member should also submit member letter in the specified format (Annexure II).
  • While filling the details in a bank guarantee, clearing members shall ensure that:
    1. No relevant portion is left blank
    2. All handwritten corrections and blanks are attested by the bank by affixing the bank seal / stamp duly authorised
    3. All irrelevant portions struck off on the printed format should also be authenticated by the bank by affixing the bank seal / stamp duly authorised.
    4. Each page of the bank guarantee should bear the bank guarantee number, issue date, stamp of the bank and should be signed by at least two authorised signatories.
    5. The clearing member should also ensure that the bank guarantee is free from any discrepancy before the same is submitted to the Clearing Corporation.
    6. The stamp paper should be issued in the name of the clearing member or the bank, no third party stamp papers are permissible.
    7. The stamp paper should not be older than 6 months from the executed date of the bank guarantee/ renewal.

In case the bank guarantee does not strictly conform to the above-mentioned conditions, the same shall not be accepted by the Clearing Corporation and benefit for the same shall be made available only upon the bank guarantee being strictly in conformity with the prescribed requirements.

The acceptance of the bank guarantees by the clearing corporation shall be subject to the bank-wise and member-wise limits as are stipulated from time to time. The maximum value of bank guarantees that can be given from the issuing bank per clearing member is as provided below:

Networth of the issuing bank * Applicable total limit per clearing member across all segments
Rs. 100 crores <= NW < Rs.200 crores Rs 5 Crore
Rs. 200 crores <= NW < Rs.500 crores Rs 10 Crore
Rs. 500 crores <= NW < Rs.1000 crores Rs 15 Crore
Rs. 1000 crores <= NW < Rs.2000 crores Rs 25 Crore
Rs. 2000 crores <= NW < Rs.3000 crores Rs 35 Crore
>=3000 crores **  

* In respect of bank guarantees issued by the designated clearing banks the maximum value of bank guarantees that can be accepted from each of these designated clearing banks shall be set at the next higher slab in which they would have ordinarily been, compared with their net worth.

** Over Rs. 3000 crores, for each Rs.1000 crores of net worth, an incremental limit of Rs.10 crores per member is allowed.

Based on the category of the member the above limits shall be subject to a maximum amount as mentioned below:

Rupees in Crores

Category of member Applicable total limit per clearing member across all segments
Professional Clearing Members / Custodian Clearing Members 200
Trading Cum Clearing Members in F&O segment 100
Other categories of the members 50

Clearing members are advised to check their applicable limit before getting their bank guarantees issued.

 

Reminder letter

Reminder letters are downloaded on a monthly basis through the extranet in respect of the Bank Guarantees those are due for renewal in the following month. Path for the letter is FAOFTP/F/LETTERS/DNLD. Further, the file naming convention for the same is F_REMINDERS_MEMBER CODE_DDMMYYYY.LIS.

Renewal of Bank Guarantees

Clearing members are required to ensure that the renewal of the bank guarantee is submitted to the Clearing Corporation in the prescribed format well in advance before the date of expiry of the bank guarantee.

Shifting of the Bank Guarantee from CM segment / Currency Derivatives segment to F&O segment

Clearing Members, who intend to release the BG provided as margin deposit in F&O segment/ Currency Derivatives and add the same as margin deposit in CM segment, are required to submit a release request in F&O segment/ Currency Derivatives Segment through CIM and submit a letter as per the format to Clearing Corporation requesting for the same. The clearing member is further required to provide an amendment letter executed on a Rs. 100 Stamp paper from the respective bank as per the format.

In case the bank guarantee is given for any clearing segment then in such a case clearing member needs to put a release request in CIM and fax a transfer request to NSE Clearing. There is no requirement from the Clearing Member to provide an amendment letter from the bank.

Members are permitted to pledge open ended mutual fund units available in demat form deposited with approved custodian as collateral towards Liquid assets. A deed of pledge is required to be executed with the custodian in specified formats. The Clearing Corporation may revise the list of approved mutual fund scheme and the haircuts from time to time. Members who have deposited mutual funds units which have been discontinued from the list of approved scheme, shall be required to take due care to replace such units.

Valuation

The mutual funds units are valued based on the Net Asset Value of the mutual fund unit. The value of the mutual fund unit is reduced by such haircut as may be prescribed by the Clearing Corporation from time to time to arrive at the collateral value of the mutual fund unit. The hair cut applicable shall be the VaR margin rate and exit load if any applicable for the respective mutual fund scheme. Only the value net of applicable haircuts and exit load shall be considered as the value of the mutual funds pledged. Valuation of mutual funds are done by approved custodians at periodic intervals as specified by the Clearing Corporation from time to time. Further, the total value of mutual funds units provided as non cash portion of the liquid assets shall not exceed 25% of the liquid assets of the respective member.

Units of money market mutual fund and Gilt funds (including units of open ended liquid mutual funds or government securities mutual funds) where applicable haircut is 10%.

Government Securities and T-Bills

  • Clearing member desirous of providing G-Sec / T-Bills shall enter into an agreement with NSE Clearing as per the format.

    Download Format of Agreement for constituent sgl account (.zip)

  • NSE Clearing shall prescribe list of G-Sec/T-Bills that shall be eligible for acceptance as collateral from time to time.
  • G-sec/T-bill shall be accepted as collateral only in electronic form. Clearing members desirous of providing G-Sec/T-Bills as collateral shall put a request in CIM. Clearing members shall further be required to enter the transaction on NDS under Settlement-Transfer Order-Clearing Agency Contribution by 3.30 pm. NSE Clearing shall confirm the transaction entered on the NDS, based on the information received from member through fax.
  • The details of NSE Clearing - SGL-II account is as follows:
    Name of the Account National Securities Clearing Corporation Limited
    Member ID BYA00168
    SGL – II A/c No. SG020168
  • The benefit of G-Sec/T-bills provided as collaterals shall be passed on immediately to clearing members on G-Sec/T-Bills being transferred to the SGL-II account of NSE Clearing.
  • For release of G-Sec / T-bills, clearing members shall put a request in CIM. The release of G-Sec/T-Bill shall be processed only at end of day. The G-sec/T-bill released by NSE Clearing shall be entered on NDS under Settlement-Transfer Order-Clearing Agency Withdrawal. Clearing member shall ensure that such transactions are approved on NDS at their end.
  • G-Sec/T-Bill shall be valued daily based on previous day's MTM prices as specified by CCIL
  • A hair cut of 10% shall be applied on the value of G-Sec/T-bill provided as collateral by clearing members. The value after applying the hair cut shall be added to the cash component of the liquid assets of the clearing member.
  • Periodic coupon / redemption payments received on the G-Sec/T-Bills provided by the member shall be passed on to the member by NSE Clearing immediately upon receipt of relative interest/redemption from Reserve Bank of India.
  • In case any of the approved G-Sec is in 'SHUT PERIOD', clearing members shall not be allowed for request for addition / release of such G-Sec.

Releases of Liquid Assets

Member may request the Clearing Corporation to release deposits held by the Clearing Corporation. Such requests may be considered by the Clearing Corporation if the Clearing Corporation chooses not to exercise its lien pursuant to the Rules, Byelaws and Regulations and subject to availability after due adjustments for the due fulfilment of all obligations and liabilities arising out of or incidental to any contracts entered into by such member and subject to the bye laws, rules and regulations of the Clearing Corporation or anything done in pursuance thereof.

The web based facility of Collaterals Interface for Members (CIM) is provided for submission of release requests of collaterals. The members may select the desired available collaterals for release. Release requests though CIM can also be placed using a file upload facility.

Collection of released collaterals submitted to NSE Clearing

The representative of the members coming to collect released FDR/ BG is required to carry an authorization letter.

The released Fixed Deposit Receipts / Bank Guarantees can be collected on the next working day of the release.

Updated on: 19/02/2020 12:00
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