Trading Clearing Risk Oct 2011

7/31/2019 Trading Clearing Risk Oct 2011

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1

UDAY TARDALKAR

VICE PRESIDENT

TATA SECURITIES LIMITED


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INTERMEDIARIES

STOCK EXCHANGES1

2

BANKERS3

BROKERS4

REGISTRARS5

INVESTMENT BANKERS

CUSTODIANS6

DEPOSITORY7

DEPOSITORY ARTICIPANTS8


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VARIUOS ROLES

BROKER

INVESTMENT BANKING1

TRADING

CLEARING MEMBER5

PORTFOLIO MANAGER6

ADVISORY7

MARGIN TRADING8

DEPOSITORY PARTICIPANT

3

DISTRIBUTION2

4


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1) INVESTMENT BANKER

FPO

IPOOFFER FOR SALE

PVT PLACEMENT

Rights

FUND

RAISING

PROMOTOR


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2) DISTRIBUTORWide Retail Network

IPO

1. KNOW YOUR CLIENT (KYC)

2. PAPERLESS PROCESS

3. AVOIDING MULTIPLE DATA CAPTURE4. DEMAT CREDIT

5. ECS

NFO

PAN

MUTUAL FUND UNITS

PAN


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3)DEPOSITORY PARTICIPANT

1. DEMAT

2. ACCOUNT TRANSFER

3. OFF MARKET TRANSFER

4. TRANSMISSION

5. PLEDGE6. LENDING AND BORROWING


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(4 and 5)TRADING AND

CLEARING MEMBER

Clearing :A process of determination of obligations ofmembers, after which the same are discharged bysettlement.

Settlement :A process of settling of transactions insecurities between buyers and sellers on the stockexchange by exchange of Money and Securities

respectively.


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6)PORTFOLIO MANAGEMENT

Systematic management -Ongoing

basis Monitoring Market variations

Identification of SecuritiesAllocation of investment Identifying asset classes.

Weightings/Proportion :Securities in the portfolio.Security selection within the

asset classes - Sector


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7)ADVISORY

REPORTS

Daily :Opening and Closing of Market

Sector Reports Theme Reports

Intraday Reports

Pre/Post Budget Event Reports

Quarterly/Credit Policies


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ADVISORY

SMS

CHAT

WEBSITE HARD COPIES


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8)MARGIN TRADING

Margin Trading facility :Offered in all thesecurities eligible for margin trading facility

Prescribed from time to time by SEBI/Stock

Exchanges .

The initial and maintenance margin by the

client: A minimum of 50% and 40%

respectively, to be paid in cash.

Liquidation of the securities in case the

clients deposit in the margin account (after

adjustment for mark to market losses) falls to

30% or less


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12

Reforms in TradingReforms in Trading

Transition from open outcry to screen-basedTransition from open outcry to screen-based

Change from person-dependent to anonymousChange from person-dependent to anonymous

systemsystem

Single city to nation-wide operationSingle city to nation-wide operation

Evolution of share shops - sub-brokers andEvolution of share shops - sub-brokers and

franchiseesfranchisees Expansion of trading capacityExpansion of trading capacity

Use of internet technology for tradingUse of internet technology for trading


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Reforms in Clearing & SettlementReforms in Clearing & Settlement

Establishment of depositories and depositoryEstablishment of depositories and depository

participantsparticipants

Transition from paper-based to dematTransition from paper-based to demat

elimination of paper-based riskselimination of paper-based risks

Creation of clearing corporations/clearing housesCreation of clearing corporations/clearing houses

Accounting Period Settlement Abolished.Accounting Period Settlement Abolished.

Shrinkage and streamlining of post-trade cycleShrinkage and streamlining of post-trade cycle move to rolling settlementsmove to rolling settlements

(T+5(T+5T+3T+3T+2)T+2)


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NEED AND FACILITATORNEED AND FACILITATOR

Emergence of different class of InvestorsEmergence of different class of Investors

-VRS-VRS

-Housewives-Housewives-Day Traders-Day Traders

Online Risk ManagementOnline Risk Management

Control on F& O PositionsControl on F& O Positions

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Market IntermediariesMarket Intermediaries

BrokerBroker

Agent for clientsAgent for clients Sub-brokerSub-broker

Agent to broker having his client baseAgent to broker having his client base Market Maker/JobberMarket Maker/Jobber

Providing two-way quotes (bids/offers)Providing two-way quotes (bids/offers)

Day TraderDay Trader Typical trader carrying out buying and selling and not having anyTypical trader carrying out buying and selling and not having anyoutstanding position at EOD.outstanding position at EOD.

ArbitrageurArbitrageur Trader taking advantage of difference in price of a securityTrader taking advantage of difference in price of a security

traded on two or more stock exchangestraded on two or more stock exchanges between equities market and derivatives marketbetween equities market and derivatives market


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Features of PlatformFeatures of Platform

Includes charts and graphsIncludes charts and graphs

News feeds produced in real time.News feeds produced in real time.

TransparencyTransparency Speed of ExecutionSpeed of Execution

AnonymityAnonymity

Lower Cost to TradeLower Cost to Trade

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Seamless link - various financial intermediariesSeamless link - various financial intermediaries

Electronic media using an interface with backElectronic media using an interface with back

office systemoffice system Trading capacity of the exchange.Trading capacity of the exchange.

Reduce operational inefficiencies faced in theReduce operational inefficiencies faced in the

manual system.manual system. Take care of huge volumes and have theTake care of huge volumes and have the

scalability to addscalability to add

On-line and off-line monitoring, andOn-line and off-line monitoring, andsurveillancesurveillance

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Surveillance ActivitySurveillance Activity

Detect unusual price/vol. Movements. atDetect unusual price/vol. Movements. at

initial stage & take corrective measures.initial stage & take corrective measures.

Reduce the possibility of MarketReduce the possibility of MarketParticipants to influence price and volumeParticipants to influence price and volume

of securitiesof securities

Control Default Risk through PositionControl Default Risk through Position

MonitoringMonitoring

Strengthen the Self Regulatory MechanismStrengthen the Self Regulatory Mechanism

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06/26/12

O t h e r s2 0 %

( m a x )

S c r i p s o n wD e r i v a t i v e p r o

N o C i r c u i t

A l l L i s t e

Circuit Filter StructureCircuit Filter Structure

M k Wid Ci i B k P ib d bM k Wid Ci i B k P ib d b


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06/26/12

Market Wide Circuit Breaker- Prescribed byMarket Wide Circuit Breaker- Prescribed by

SEBISEBI Calculated on Closing Index of the QtrCalculated on Closing Index of the Qtr

Percentages Converted into pointsPercentages Converted into points

Round off to nearest 25 points for SensexRound off to nearest 25 points for Sensex

Revisions made every QuarterRevisions made every Quarter

EgEg 10%= 1475 pts10%= 1475 pts

15% = 2200 pts15% = 2200 pts

20% = 2925 pts20% = 2925 pts

M k Wid Ci i B k P ib d bM k t Wid Ci it B k P ib d b


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06/26/12


SEBISEBI Bef 1 PMBef 1 PM 1 HR Halt1 HR Halt

1.00- 2.301.00- 2.30 1/2 HR Halt1/2 HR Halt

After 2.30After 2.30 No HaltNo Halt


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06/26/12


SEBISEBI Bef 1 PMBef 1 PM 2 HR Halt2 HR Halt

1.00- 2.001.00- 2.00 1 HR Halt1 HR Halt

After 2PMAfter 2PM Halt for rem DayHalt for rem Day

k id i i k ib d b


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06/26/12


SEBISEBI

Any TimeAny Time Halt for rem DayHalt for rem Day


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06/26/12

Surveillance ActivitiesSurveillance Activities

1. PriceMonitoring2. Position Monitoring

3. Investigation


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06/26/12

Price MonitoringPrice Monitoring

1. On-Line & off-Line Surveillance

2. Rumour Verifications


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06/26/12

On-Line SurveillanceOn-Line Surveillance

CapabilitiesCapabilities

On-Line analysis Scrips causing rise or fall of indices . The members who have traded in those scrips

Monitor Member/client Concentration in specific scrip

Access to Trades & Orders of Members with time stamping Graphic display of movement of prices over a period of

time (Day/year)

Position of Top n Members v/s the rest of Market


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06/26/12

On line SurveillanceOn line Surveillance

On-Line real time Monitoring of Markets using

Surveillance Systems Alert Mechanism

Benchmarks

Price

Volume Position

Trigger-- Alert


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06/26/12

SurveillanceSurveillance Some Indicative Alerts

% change in prices over a period of time

Trading in infrequently traded scrips

Scrips hitting 52 week New High / Low (on Rolling Basis)

Surveillance actions or Investigations initiated in the scripsidentified from the above-stated alerts.


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06/26/12

Surveillance Tools & ActionsSurveillance Tools & ActionsSpecial Margins @ 25/50/75 % on Buy/Sell/Both

sides.

Reduction of Circuit Filters

Transfer of a scrip on trade-to trade settlement basis

Suspension of a scripIssuing of warning / or Imposition of penalty on

members involved/ deactivation of BOLT

terminals/ suspension


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Block Deal DisclosureBlock Deal Disclosure

Block Deal order size Minimum of :

I) 5,00,000 shares or

ii) Rs. 5 Crore Order Value (Order Qty * Order

Value).

Bulk Deal DisclosureBulk Deal Disclosure

Delivery Trade .05%Delivery Trade .05%


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Block Deal DisclosureBlock Deal Disclosure

Features:Execution Time on Exchanges: first 35 minutes from start of market hours

(normally 9:15: a.m to 9:50a.m.)

Valid Price range: within +/-1%from the ruling market price (i.e. last

traded price) or the previous closing price (if there is no trade executedin the scrip before entering of the block deal orders) subject to the

applicable circuit filter limits.

BLOCK DEAL Transactions has to be settled on a Trade to Trade Basis

(e.g. as settled in T Group).

Exchanges to disseminate the information.


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Sequence of TradeSequence of Trade

Order EntryOrder Entry

Order ConfirmationOrder Confirmation

TradeTrade Trade ConfirmationTrade Confirmation

Exercise in Case of OptionsExercise in Case of Options

Settlement of PositionSettlement of Position


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Trader WorkstationTrader Workstation

Real-time display of best buy/sell ordersReal-time display of best buy/sell orders

Online trade execution and confirmationOnline trade execution and confirmation

Display of market data statisticsDisplay of market data statistics

Continuous calculation of market indicesContinuous calculation of market indices

Flashing of ticker messagesFlashing of ticker messages

Dissemination of market announcementsDissemination of market announcements


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The PlatformsThe Platforms

Online and Offline Trading PlatformsOnline and Offline Trading Platforms

Types of Trading Platforms in IndiaTypes of Trading Platforms in India

BOLT- Bombay On-line Trading SystemBOLT- Bombay On-line Trading SystemNEAT- National Exchange for AutomatedNEAT- National Exchange for Automated

Trading .Trading .

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BOLT-BSEBOLT-BSE Electronic trading platform MembersElectronic trading platform Members

hierarchyhierarchy LAN and leased lines- LocalLAN and leased lines- Local

V-SATs for upcountry members.V-SATs for upcountry members.

Based on Price and Time PriorityBased on Price and Time Priority

Basket Trading FacilityBasket Trading Facility

VaR & ELM Margin BlockedVaR & ELM Margin Blocked

Allows setting of various checks, limits, forAllows setting of various checks, limits, for

better control .better control .

Provides analytical data to the exchangeProvides analytical data to the exchange

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WEBEXWEBEX

BSEwebx:Offering all the products andBSEwebx:Offering all the products and

services through a single internet platform.services through a single internet platform.

Running both on the internet and the BSERunning both on the internet and the BSE

Private NetworkPrivate Network

Allows members, their hierarchy andAllows members, their hierarchy and

investors to trade and manage risk directly.investors to trade and manage risk directly.

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NEATNEAT Fully automated screen-based trading-OffersFully automated screen-based trading-Offers

transaction protection, robust inter-processtransaction protection, robust inter-processcommunication and network interface.communication and network interface.

Index information - transmitted online to usersIndex information - transmitted online to users

through NEAT to ensure fair trading in thethrough NEAT to ensure fair trading in the

derivatives marketderivatives market

Simultaneously- similar real time information toSimultaneously- similar real time information to

leading info vendors and news agencies who inleading info vendors and news agencies who in

turn disseminate them to various actual users.turn disseminate them to various actual users.

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PROGRAMMED TRADINGPROGRAMMED TRADING

A bulk order - executed for a selectedA bulk order - executed for a selected

portfolioportfolio

Difficult to punch all the entries at a timeDifficult to punch all the entries at a time

into the system as the system works on timeinto the system as the system works on time

priority also.priority also.

Order file is created offline it is uploadedOrder file is created offline it is uploaded

into the trading system(NEAT/BOLT etc)into the trading system(NEAT/BOLT etc)

This facility available on the tradingThis facility available on the trading

platform is called basket trading alsoplatform is called basket trading also38

P d T di


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Programmed TradingProgrammed Trading Individual Order Level:Individual Order Level:

Quantity Limits checkQuantity Limits check Price Range checksPrice Range checks

Trade price protection checksTrade price protection checks

Order value checksOrder value checks Client Level:Client Level:

Net position v/s available marginsNet position v/s available margins

RBI violation checks for FII restricted stocksRBI violation checks for FII restricted stocks Position limit checksPosition limit checks

Trading limit checksTrading limit checks

Exposure limit checks at individual client level andExposure limit checks at individual client level and39


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Internet Trading - OverviewInternet Trading - Overview

CURRENT STATISTICS:-CURRENT STATISTICS:-

Total no. of people trading in shares 1.97Cr*.Total no. of people trading in shares 1.97Cr*.

21-27%* are trading online.21-27%* are trading online.

Total online customers:-38/45LacsTotal online customers:-38/45Lacs


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Product BasketProduct Basket

Equity : Place online trades for virtually any stockEquity : Place online trades for virtually any stock

listed onlisted on NSE & BSENSE & BSE..

Margin Trading : Execute Intra-day MarginMargin Trading : Execute Intra-day Margin

Orders uptoOrders upto 3 to 4 times3 to 4 times your available funds.your available funds.

F&O : With a Derivative-approved Account, youF&O : With a Derivative-approved Account, you

cancan pursue a wide range ofpursue a wide range of Futures & OptionsFutures & Options

trading strategiestrading strategies with speed and ease.with speed and ease.

IPO Online :IPO Online : Invesing Online in IPOsInvesing Online in IPOs at the clickat the click

of a button. No paperwork no queues. Getof a button. No paperwork no queues. Get

information on IPO news , Forthcoming IPOs andinformation on IPO news , Forthcoming IPOs and

a lot morea lot more


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Product BasketProduct Basket

GOI Bonds : Fixed income securitiesGOI Bonds : Fixed income securitiescan help reduce your risk. Investcan help reduce your risk. Investonline inonline in GOI BondsGOI Bonds..

Mutual Fund : Offer Online access toMutual Fund : Offer Online access tomutual fund schemesmutual fund schemes from leadingfrom leading

fund families.fund families. Commodity :Commodity : Metals, energies,Metals, energies,

grains and livestockgrains and livestock Insurance : Life insurance providesInsurance : Life insurance provides

financial security against anfinancial security against anunpredictable future .unpredictable future .


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Web Site & ContentWeb Site & Content

Technical ChartingTechnical Charting

Portfolio TrackerPortfolio Tracker

IPO Research ToolsIPO Research Tools

Mutual Funds Research ToolsMutual Funds Research Tools

Commodities Research ToolsCommodities Research Tools

Basic Tools for the end customerBasic Tools for the end customer


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Order Matching RulesOrder Matching Rules The best buy order matched with best sell orderThe best buy order matched with best sell order

An order may match partially & resulting in multipleAn order may match partially & resulting in multiple

tradestrades

The best buy order is the one with the highest priceThe best buy order is the one with the highest price

The best sell order is the one with the lowest priceThe best sell order is the one with the lowest price Orders lying unmatched in the system are 'passive'Orders lying unmatched in the system are 'passive'

ordersorders

Orders that come in to match the existing orders areOrders that come in to match the existing orders arecalled 'active' orders.called 'active' orders.

Orders are always matched at the passive order price.Orders are always matched at the passive order price.


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TYPES OF ORDER:TYPES OF ORDER: Market order: An order that requiresMarket order: An order that requires

immediate execution at the best priceimmediate execution at the best priceavailable.available.

Limit order: An order to transact at aLimit order: An order to transact at aspecified price. This guarantees thespecified price. This guarantees the

price at which you will buy or sell aprice at which you will buy or sell asecurity.security.

Stop Order: A market order that tradesStop Order: A market order that tradesafter a specified level has been reached.after a specified level has been reached.

This may be a stop-loss or stop-limit.This may be a stop-loss or stop-limit.The exact price cannot be guaranteed,The exact price cannot be guaranteed,but this can be a good way to protectbut this can be a good way to protectyour downside.your downside.


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All or None (AON): A stipulation onAll or None (AON): A stipulation ona limit order either to buy or sell aa limit order either to buy or sell a

security only if the broker can fillsecurity only if the broker can fillthe entire order, not part of itthe entire order, not part of it

Day Order: An order that expires atDay Order: An order that expires atthe end of the business day if it hasthe end of the business day if it has

not been executednot been executedGTC (Good Till Canceled): An orderGTC (Good Till Canceled): An order

either to buy or to sell a security thateither to buy or to sell a security that

remains in effect until the customerremains in effect until the customercancels it or until it is executed bycancels it or until it is executed bythe broker.the broker.


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CLEARING AND SETTLEMENT

Clearing :A process of determination of obligations ofmembers, after which the same are dischargedby settlement.

Settlement :A process of settling of transactions insecurities between buyers and sellers on thestock exchange by exchange of Money andSecurities respectively.


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Funds Settlement

FUNDS PAY IN: Members having purchase value more than sells have

an obligation to make net payment to Clearing Housethrough the clearing account with any designated bank.

Funds obligations are debited to members clearingaccounts on T+2 at 10:30am.

Funds Pay-out The members having more sells value than purchases

receive a credit by net amount by Clearing House onT+2 at 2:30pm.Every members is required to have clearing account

with exclusive with any of the approved clearing banks.

Acco nting Period settlement


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Accounting Period settlement

Rolling settlement

Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat

Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat

Trade Day (T) Pay-in Pay-in Pay-out(Phy) (Dmat) (Phy+Dmat)

T1

T2

T3

T4

T5

Trade Days

(Each taken as a

different settlement)

P1

P2

P3

P4

P5

Pay-in & Pay-out

(same day)for

each trade

Pay-in deadline : 3:30 p.m.

Pay-in deadline : 10:30 a.

BSE

Phy. segment: NT

Dmat segment: AU

NSE

Phy. segment: EE

Dmat segment: CC


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Structure of the Depository System Electronic Linkage

NSDL

Issuer

DP

Stock Exch.(CC/CH)

ClientClearing Member

(Broker)

S ttl t M h i f M k t T f


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NSDL

DP1

Sellers BO A/c

Settlement Mechanism for Market Transfers

CC Transit A/c

CM1 Selling Client

DP2

Buying Client CM2

Assumption:

1. Clients and their CMs have

common DPs

2. CMs have given standing

instructn for credits to Pool A/c

Pay-inof securities

Pay-out of

securities

Note:

Funds transfer takes

place outside the

NSDL System

Issuer/RTA

Debit

Instructn

Receipt CM1Pool A/c

Delivery Receipt CM2Pool A/c

Delivery

CreditInstructn

Funds pay-out by CC/CH Funds pay-in to CC/CH

Pay-in

Instructn

Pay-out

Instructn

Data Downloaded

13

4

5 8

9

10

Buyers BO A/c

112

12

CC Settlement A/c6 7

1. Debit instructions by selling client to DP in favor of his broker (CM1)

2. Transfer by DP to CM1 Pool A/c

3. Pay-in instruction by CM1 to DP

4. Transfer from CM1 Pool a/c to Delivery a/c

5. Transfer from Delivery a/c to CC Transit a/c

6. Transfer by NSDL from CC Transit a/c to CC Settlement a/c

7. Pay-out from CC Settlement a/c to CC Transit a/c

8. Transfer by NSDL from CC Transit to CM2 Receipt A/c

9. Auto transfer from Receipt a/c to CM2 Pool A/c

10. Pay-out instr. by CM2 to DP Credit instr. by BO to DP

11. Transfer from CM2 Pool a/c to Buying Clients BO A/c

12. Download to Issuer / RTA

10

Funds Funds


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Clearing & Settlement Processes

Trade confirmation: counter parties agree to terms of

trade (security, quantity, price and settlement date)Auto confirmation in electronic trading system

Obligation determination: counter parties informedabout delivery/receipt obligations

Clearing Corporation (CC)- central counter party Pay-in of funds and securities: counter parties

transfer funds / securities to CC.

Depositories transfer securities from counter partyaccounts to CC

CC issues electronic debit instructions to theclearing banks for payment obligations of counter

parties

Cl i & S ttl t P td


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Clearing & Settlement Processes: contd Pay-out of funds and securities: after processing

for shortage of funds/securities, CC sends

electronic instructions to depositories/clearingbanks for releasing pay-out of securities/funds

Risk management: Monitoring of track record

and performance of trading members in

relation to their net worth

Online monitoring of positions and exposures

Collection of margins

Automatic disablement of trading members if

the limits are reached

Back Office Operation Processes


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Back Office Operation Processes Back Office Operations (BOO) begin at the end of the

trading day. These operations are mainly responsible

for settlement of trades executed by the Company onbehalf of its clients. Main activities involved in BOOare as follows:

Uploading of trades in Back Office System

Matching of obligationGeneration, printing and issuing of Contract Notes

Pay-in of funds

Pay-in of securitiesAuction

Pay-out of funds

Pay-out of securities


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RISK MANAGEMENTRISK MANAGEMENT

Risk is exposure to uncertainty.Risk is exposure to uncertainty.Uncertainty and Exposure to thatUncertainty and Exposure to that

uncertaintyuncertainty..

The Risk Management System (RMS)The Risk Management System (RMS)

Reviewing credit and market risk managementReviewing credit and market risk management

policies, procedures and issues on a regular basispolicies, procedures and issues on a regular basis

and ensuring adherence to the sameand ensuring adherence to the same


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Types of RiskTypes of Risk

There are at least six categories of Risks that anInvestor should consider.1. Interest Rate Risk(Rising/Falling Rates)2. Economic Risk

(Inflation/Deflation/Disinflation)3. Business Risk(Fraud/Incompetence/Competition)4. Market Risk (Supply/Demand)5. Conversion Risk (Liquidity/Marketability)6. Government Risk (Taxes/Regulations)


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What Is Your Risk Tolerance?What Is Your Risk Tolerance?

Your risk tolerance is the way you choose tomanage risks. Risks can be handled in one of fourways or combinations of the four:

1. Retain--With no protection as in holding Stock.

2. Shift--A contractual arrangement in exchange fora premium. The more risk you shift, the higher thecost.

3. Self-insure--Emergency Reserve fund/ profits.4. Avoid--Not to take position beyond comfort level.


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RMS IN BROKING HOUSERMS IN BROKING HOUSE

The adherence to procedures and periodicreview of the same is done by the Risk

Management Committee (RMC)Retail Head,

Head of Dealing

Compliance Manager,Risk Manager

and CFO.


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Assigning limitsAssigning limits

Net worth,

Portfolio of the client,

Estimated income of the client, Profession of the client,

Reputation of other brokers with

whom the client is registered, Introducers reputation etc.

MARGIN /EXPOSURE LIMITSMARGIN /EXPOSURE LIMITS


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MARGIN /EXPOSURE LIMITSMARGIN /EXPOSURE LIMITSCASH/SECURITIES : FIVE TIMES

SECURITIES:A GROUP/30%HairCutRMC to Reviewing credit and Market

risk management policies and

ProceduresRisk Manager ConvenerMembers

CEOCompliance headChief Financial Officer

Retail head

Operating GuidelinesOp

erating Guidelines


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Operating GuidelinesOperating GuidelinesThe RMC meetings Regular basis

at the discretion of the RM.The RMC reviews adherence to

the RMS and discusses issues as

evidenced in the daily operations.Exceptions covered within the

policy framework to be approvedby RMC

Policy changes or exceptions

beyond the policy Approval of

M i & EM

i & E


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Margin & ExposureMargin & Exposure Initial Margin Rs 30000 per contract forDerivatives

Segment.

Exposure 4 times for Delivery based and up to 8

times for intra-day limits.

Margins- In the form of Cash, Approved stocks, FD

All Mark To Market (MTM) : CASH from the client

before 11:00 a.m of the next day .


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Margin & ExposureMargin & Exposure

RM daily reviews an Exposuremonitoring statement basedon end of the day positions.

The next days limits are setbased on this statement andthe request received from the

Retail HeadHigh Risk clients are flagged

by RM, and notified to the

Retail Head.

Square off trigger Dealer to inform


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Square off trigger Dealer to informthe client and RM.

As far as possible, square offswithout intimation to client isavoided.

All Intra Day positions aresquared off by 3.15 p.m.

However, on request by the clientbefore 3.15 p.m., Dealers have

the discretion to keep the clientspurchase position open.Payment towards the obligation

should be in the custody By 12

Before squaring off 3 15 p m all the


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Before squaring off 3.15 p.m., all thepending orders are cancelled

Client not honoring commitment onT+2 is termed as a default. DelayedPayment Charges are levied @ 15% of

the amounts due. Position Squared off on T +5 Day

After 2.30 p.m., fresh purchase are

created only against the clientscommitment to settle the samethrough delivery and payment. Nofresh sale positions are created after

Blow Out GuidelinesBlow Out Guidelines


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Blow Out GuidelinesBlow Out Guidelines Intraday: Enforced online and

during trading hours. Monitoringby RMS

The RM to inform RH when theclient's MTM loss reaches 40% ofthe margin, the RH to intimatethe client.

If the client fails to pay toincreased exposure, and the MTMloss reaches 50% position wouldbe squared off by intimating the

client

End of day: This process commences


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End of day: This process commencesonce the back office system gets

updated at the end of the day.This is applicable to clients who for

some reason do not square off their

position by the end of the tradingsession and default on payment (i.e.does not pay by 12 pm of the nextday).

The position would be squared offduring the day at the discretion of theBM and RH.

Clients on Watch List/Clients on Watch List/


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Clients on Watch List/Clients on Watch List/

RestrictionRestriction

A client is put on a Watch Listor Restricted list:

If he/she displays more thantwo incidences of latesettlement.

When he/she bounces a chequeat least once.At management discretion or if

the RM suspects the existing


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Surveillance of ScripsSurveillance of Scrips

EOD report for Quantities>10000 shares

Amount Exceeding One Million

Greater than .5% of the Share Capital Monitoring the transactions of PENNY

Stocks

Accumulation of stock in last fewsettlements

Trade at unreasonable price

ConclusionConclusion


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ConclusionConclusion RMS is mix of science and art. Losses are

inevitable, but one must learn from the

past. Risk is not bad, but risk that is

misplaced, mismanaged or unintended is

bad. A clear distinction should be made

between risk management and risktaking. Risk management oversees andensures the integrity of the process withwhich risks are taken. To maintain theobjectivity, risk management cannot be a

part of the risk taking process.


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THANK YOUTHANK YOU

Documents

Trading Clearing Risk Oct 2011