More Stories

Informist, Tuesday, Oct. 1, 2024

 

MUMBAI – The Securities and Exchange Board of India has decided that clearing corporations and stock exchanges need to adopt certain additional stress testing scenarios and methodologies for arriving at the minimum required corpus of the core settlement guarantee fund in their equity derivatives segments, according to a circular issued Tuesday.

The market regulator expects this to increase the minimum required corpus of the equity derivatives settlement guarantee funds of the clearing corporations of the National Stock Exchange of India Ltd. and BSE Ltd.

 

The additional stress testing scenarios include assuming stressed value-at-risk matrix, and incorporating a factor model where the highest three-day Nifty 50 rise and fall since 2000, to arrive at daily worst case loss if client and proprietary positions in equity derivatives are closed out suddenly due to extreme rise or fall in markets. SEBI said the clearing corporations will have to jointly frame a policy on stress periods which shall be the underlying basis of each of the additional stress testing models.

 

SEBI said in the circular Tuesday that a one-time inter-segment transfer of settlement guarantee funds would be allowed to clearing corporations "to cater to increase in the initial MRC (minimum required corpus) requirement of equity derivatives segment after adoption of new stress testing methodologies." Inter-segment transfer refers to extra corpus of the cash market settlement guarantee fund over and above its minimum required corpus being moved to the settlement guarantee fund in the equity derivatives segment.

 

The market regulator said clearing corporations will be classified under two categories, A and B, where the A category will be required to provide higher coverage of its calculated potential stress loss. A clearing corporation will be in category A if it has 40% or more of the share of clearing volumes in equity derivatives, with the remaining getting classified as category B. NSE Clearing, the clearing subsidiary of NSE, is likely to be a category A clearing corporation. The category A will need to have a credit exposure higher than INR 105 billion or an amount calculated by considering simultaneous default of at least three clearing members causing the highest credit exposure, SEBI said in the circular.   End

 

Reported by Rajesh Gajra

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.