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Regulatory Recommendations
- Emphasis on exchange-level
regulation
- SEBI to act as regulator
of last resort
- Modern systems for
fool-proof and fail-proof regulation
- All members to be inspected
- SEBI will approve rules,
bye-laws and regulations
- New derivative contracts
to be approved by SEBI
- Exchange to provide
full details of proposed contract
- Economic purposes of
the contract
- Likely contribution
to the market’s development
- Safeguards incorporated
for investor protection and fair trading
Trading Stipulations
- Trading days and hours
to be stipulated in advance
- Pre-determined expiration
date and time for each contract
- Last trading day to
be stipulated in advance
- Contract expiration
period may not exceed 12 months
Entry Rules
- No automatic entry
- Capital adequacy -
higher than cash market
- Clearing and non-clearing
members
- Minimum net worth Rs
300 lakhs
- Minimum deposit Rs
50 lakhs
- Option writers - higher
deposits
- Broker members, sales
persons and dealers to pass a certification program
- Registration with SEBI
in addition to registration with exchange
Clearing Corporation
- Full novation
- Upfront and mark-to-market
margins
- Power to disable member
from trading
- Margins to factor in
volatility
- Margins based on value
at risk - 99% confidence
- No trading interests
on board
- National level clearing
corp in future
- Maximum deposit based
exposure limit
- EFT for margin payments
- Cross-margining not
advisable
- Margin collection from
clients
- Exposure limits on
gross basis
- Trading to be clearly
indicated as own/clients and opening/closing out
- Segregation of own/clients
margin
- No set off permitted
- In case of default,
only own margin can be set off against members’ dues
- Prompt transfer of
clients in case of default by brokers
- Close out all open
positions by CC at its option
- Special margins on
members permitted
- Margins can be withheld
- additional margins can be further demanded
- CC may prescribed maximum
long/short positions by members
- Exposure limit in quantity
/ value / % of base capital
- Ask members to close
out excess positions
- CC may close out such
positions
Mark to Market and
Settlement
- Daily settlement of
futures contracts
- Daily settlement price
- closing price of futures
- Final settlement price
- closing price of underlying security
Categories of Members
- TM Clearing Member
(own, clients, TMs, their clients)
- Trading Member (own,
clients)
- Professional (Custodian)
Clearing Member (TMs, their clients)
Sales Practices
- Risk disclosure document
with each client mandatory
- Sales personnel to
pass certification exam
- Specific authorisation
from client’s board of directors/trustees
Trading Parameters
- Each order - buy/sell
and open/close
- Unique order identification
number
- Regular market lot
size, tick size
- Gross exposure limits
to be specified
- Price bands for each
derivative contract
- Maximum permissible
open position
- Off line order entry
permitted
 
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