Exchanges mandate margins on exposures taken in the markets. A brief write-up on the various margins both in cash and futures is given below. For more specific details, visit the exchange site in question.The margin files on specific scrips and futures and option contracts in respect of different exchanges is given in Dropbox and Account Login.
Daily margin, comprising the sum of VaR margin, Extreme Loss Margin and mark to market margin is payable.
All securities are classified into three groups for the purpose of VaR margin
For the securities listed in Group I, scrip wise daily volatility calculated using the exponentially weighted moving average methodology is applied to daily returns. The scrip wise daily VaR is 3.5 times the volatility so calculated subject to a minimum of 7.5%.
For the securities listed in Group II, the VaR margin is higher of scrip VaR (3.5 sigma) or three times the index VaR, and it is scaled up by root 3.
For the securities listed in Group III the VaR margin is equal to five times the index VaR and scaled up by root-3.
The index VaR, for the purpose, is the higher of the daily Index VaR based on S&P CNX NIFTY or BSE SENSEX, subject to a minimum of 5%.
1.5 times the standard deviation of daily logarithmic returns of the security price in the last six months. This computation is done at the end of each month by taking the price data on a rolling basis for the past six months and the resulting value is applicable for the next month.
Mark to market loss is calculated by marking each transaction in security to the current market price. In case the net outstanding position in any security is nil, the difference between the buy and sell values shall be considered as notional loss for the purpose of calculating the mark to market margin payable.
The actual margining and position monitoring is done on-line, on an intra-day basis. NSCCL uses the SPAN® (Standard Portfolio Analysis of Risk) system for the purpose of margining, which is a portfolio based system.
Initial margin requirements are based on 99% value at risk over a one day time horizon. However, in the case of futures contracts (on index or individual securities), where it may not be possible to collect mark to market settlement value, before the commencement of trading on the next day, the initial margin is computed over a two-day time horizon, applying the appropriate statistical formula. The methodology for computation of Value at Risk percentage is as per the recommendations of SEBI from time to time.
The exposure margins for options and futures contracts on index are as follows:
For Index options and Index futures contracts:
For option contracts and Futures Contract on individual Securities:
The higher of 5% or 1.5 standard deviation of the notional value of gross open position in futures on individual securities and gross short open positions in options on individual securities in a particular underlying. The standard deviation of daily logarithmic returns of prices in the underlying stock in the cash market in the last six months is computed on a rolling and monthly basis at the end of each month.