MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI BALASAHEB VIKHE PATIL)
(a): Reserve Bank of India (RBI) has issued guidelines
for margin trading on September 22, 2001 permitting banks, to
extend finance to stockbrokers for margin trading within
the overall ceiling of 5% prescribed for exposure
of banks to the capital market.
(b): According to SEBI, it has permitted the trading on
stock option contracts on 31 stocks on the derivative
segment of the stock exchange, Mumbai (BSE) and the futures
and options segment of National stock exchange (NSE) on
July 2, 2001. Salient features of individual stock options are :
1. Premium settled American style stock options, settled
in cash at exercise, for an initial period which would
later be shifted to physical settlement.
2. Each stock option contract has a minimum contract size
of Rs.2 lakhs at the time of its introduction.
3. Each stock option contract can have a maximum
maturity of 12 months and should have a
minimum of 3 strikes (in the money, near the
money and out of the money). Currently, there are
1 month, 2 month and 3 month option contracts being
traded on the 31 stocks.
4. The premium on the stock options is
collected from the buyers in cash and
paid out to the sellers in cash on T+1 day.
5. The initial margin requirements on the 31
stock option contracts is based on the worst case loss
of a portfolio of an individual client to cover
99% VAR over a one day horizon. The initial margin
requirement is netted at the level of the
individual client and is collected on a gross
basis at the level of trading/clearing member.
6. The computation of worst scenario loss based
on the latest scenario contract values is
applied to member/client portfolios on a real time basis.
7. A portfolio based margining approach is adopted which
takes an integrated view of the risk
involved in the portfolio of each individual client
consisting of his positions in derivative contracts.
8. Exposure limits: The notional value of gross open
positions at any point in time shall not
exceed 20 times the liquid networth of a member.
Hence 5% of the notional value of gross short open
position in stock option contracts is collected/adjusted
from the liquid networth of a member on a real time basis.
9. Position limits: A consolidated position limit
for stock options and single stock futures on a
particular underlying has been prescribed for
a trading member at higher of Rs. 50 crores
or 7.5% of the open interest in all derivative contracts
in that underlying. Similarly there is a marketwide
limit on the consolidated open position for both stock
options and single stock futures on a particular
underlying which is lower of 30 times the average
number of shares traded daily during the previous
calendar month, in the cash segment of the
exchange or 10% of the number of shares held by
non-promoters i.e., 10% of the free float, in terms
of number of shares of a company.
The salient features of margin trading are :
· Banks would be allowed to provide finance to stock
brokers for the purpose of margin trading in
actively traded scrips forming part of NSE
NIFTY and BSE Sensex within overall ceiling of
5% prescribed for bank exposure to capital market.
· The minimum margin to be maintained by the banks is 40%.
· Banks to put in place an appropriate system for
monitoring and maintaining the margin
of 40% on a regular basis.
· Further the bank`s Board is required to prescribe
and review necessary safeguards in respect of margin trading.
· The total finance extended of margin trading is to be
disclosed by the banks in the `Notes to the Account` to
their balance sheets.
· The RBI-SEBI Technical committee will again review the guidelines in June 2002.
(c): SEBI has intimated that the Stock Exchange, Mumbai (BSE)
and the Delhi Stock Exchange Association Ltd (DSE) are considering
a proposal to consolidate the two exchanges. This issue
has been placed before the Boards of both the exchanges.
The Board of Directors of the DSE and the
Governing Board of the BSE have accorded `in-principle`
approval to the scheme. However, there are various
issues involved in the scheme for both the exchanges
regarding interest of the members, staff of
the exchanges and the process of valuation. The scheme can
be completed once these issues are sorted and it is
approved by the Boards of both the exchanges.
(d) & (e): In the Annual General Meeting of the DSE
held on December 20, 2000, as reported by the
Delhi Stock Exchange it was decided to donate and/or
gift to DSE Securities Ltd (a subsidiary of DSE) a sum of
Rs. 6 crores or such higher sums as may be approved by the
Board of Directors. DSE convened a meeting of the
Board of Directors on 27th June, 2001 to discuss the
donation and/or gift of Rs. 3.5 crores to the
subsidiary company. Some of the Nominee Directors on
the DSE Board, objected to the proposal, and the matter
was not considered by the DSE Board again.
