CIRCULAR
SEBI/HO/MRD/TPD-1/P/CIR/2024/24 April 23, 2024
To
All Stock Exchanges
All Clearing Corporations
(Except Commodity Derivatives Exchanges/Clearing Corporations)
Sir/Madam,
Cross Margin benefits for offsetting positions having different expiry dates
1. Chapter 5 of SEBI Master Circular dated October 16, 2023 for Stock Exchanges
and Clearing Corporations inter-alia provides stipulations for cross margin
between index futures position and constituent stock futures position in
derivatives segment (Clause 1.2.9) as well as cross margin in respect of
offsetting positions in correlated equity indices (Clause 1.2.10). At present, the
aforesaid cross margin benefits are provided if both the correlated indices or an
index and its constituents, as the case may be, have same expiry day.
2. In discussion with stock exchanges, Clearing Corporations and Risk
Management Review Committee of SEBI, it has been decided to extend the
cross margin benefit on offsetting positions having different expiry dates subject
to the following :
a. A spread margin of 40% would be levied in case of offsetting positions
in correlated indices having different expiry dates. Spread margin of 30%
would continue to get levied in case of same expiry date (i.e. existing
requirement).
b. A spread margin of 35% would be levied in case of offsetting positions
in index and its constituents having expiry date different from index.
While the expiry date of index futures can be different from that of its
constituents, the expiry date of futures contracts of all constituents
should be same in order to obtain the aforesaid cross margin benefit.
Further, spread margin of 25% would continue to get levied in case of
same expiry date of index and constituents (i.e. existing requirement).
c. The aforesaid spread margin benefit would be revoked at the beginning
of the expiry day of the position which expires first (i.e. first of the expiring
indices or constituents) in case the expiry dates of both legs of the
position are different.
d. Exchanges / Clearing Corporations to put in place suitable monitoring
mechanism to keep track of cross margin activities of participants.
e. All other requirements pertaining to cross margin remain unchanged and
applicable.
3. The circular would be effective three months from its date of issuance. The
circular is being issued in exercise of powers conferred under Section 11 (1) of
the Securities and Exchange Board of India Act, 1992 to protect the interests
of investors in securities and to promote the development of, and to regulate
the securities market.
Yours faithfully,
Ansuman Dev Pradhan
Deputy General Manager
Technology, Process Re-engineering, Data Analytics
Market Regulation Department
+91-22-26449622 Email: ansumanp@sebi.gov.in