|
Circulars 2001 Depositories and Custodians
|
December 2001
December 26, 2001
· FITTC Circular No.5 dated December 26, 2001
November 2001
November 13, 2001
· FITTC Circular No.4 dated November 13, 2001
October 2001
October 15, 2001
· FITTC Circular No.3 dated October 15, 2001
August 2001
August 3, 2001
· Compulsory Dematerialisation in Rolling Settlement effective January 02, 2002
SECURITIES AND EXCHANGE BOARD
OF INDIA
FITTC DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021
D&CC/FITTC/CIR - 05/2001
December 26, 2001
To,
All Stock Exchanges and Depositories
Dear Sir,
Please refer to circular no. IES/42365/2001 dated December 20, 2001 regarding the pre-ponement of rolling settlement in the remaining scrips from Monday December 31, 2001.
The exchanges have informed that there are companies that are yet to sign agreements and establish connectivity with both the depositories. As advised earlier by SEBI, the scrips of such companies which have not signed agreements and established connectivity with both the depositories by September 30, 2001 shall be traded on ‘Trade for Trade’ settlement mode in the rolling settlement from December 31, 2001. These scrips will be moved into normal rolling settlement once they have established connectivity with both the depositories as per the procedure already laid down by SEBI.
As per the information provided by both the depositories the list of scrips that have established connectivity with them as on September 30, 2001 is given in annexure ‘A (serial no. 01 to 3244) These scrips would be traded in the normal rolling settlement mode with effect from December 31, 2001.
Accordingly the scrips that have established connectivity with both the
depositories as on October 31, 2001 (serial no. 3245 to 3305) and November 30,
2001 (serial no. 3306 to 3350) shall be moved into the normal rolling
settlement mode from the 'trade for trade' settlement window of the exchanges
with effect from January 31, 2002 and February 28, 2002, respectively.
Yours faithfully,
R M JOSHI
EXECUTIVE DIRECTOR
DEPUTY GENERAL MANAGER
DEPOSITORIES AND CUSTODIAN CELL
D&CC/FITTC/CIR-04/2001
November
13, 2001
To,
All
Stock Exchanges/Depositories/
Custodians
and AMFI/RAIN
Dear Sir,
Please refer to our circular no. DCC/FITTC/CIR-3/2001 dated October 15, 2001.
It is further advised that at present only some of the companies print the bank account details of the investors on the warrants (payment instrument), for distribution of dividends and other cash benefits etc,. There are some companies, which are not printing the bank account details on the payment instruments. SEBI has also received complaints about fraudulent encashment of the dividend and other cash benefit instruments.
To
avoid such situations the Companies are advised to mandatorily print the bank accounts
details furnished by the Depositories, on the payment instruments. The
Depositories and the Stock Exchanges are therefore advised to instruct the
companies / issuers accordingly.
Yours faithfully,
G S REDDY
Deputy General Manager
Depositories and Custodian
Cell
DCC/FITTCIR-3//2001
October 15, 2001
To,
All Stock Exchanges / Depositories /
Custodians and AMFI / RAIN
Dear Sir,
It has been brought to our notice that some of the companies are not utilizing the facility of ECS for distributing dividends, or other cash benefits etc., to the investors. It is advised that all the companies should mandatorily use ECS facility wherever available. In the absence of availability of ECS facility, the companies may use warrants for distributing the dividends.
The Depositories and Stock Exchanges are,
therefore, advised to instruct the companies accordingly.
Yours faithfully,
G. S. Reddy
DEPUTY GENERAL MANAGER
DEPOSITORIES AND CUSTODIAL CELL
FITTC/DC/POLICY-CIR-01/2001
August 03, 2001
To,
All Stock Exchanges/Depositories/
Custodians and AMFI/RAIN
Dear Sirs,
Compulsory Dematerialisation in Rolling
Settlement
effective January 02, 2002.
It has been decided that the stocks, which are not under compulsory rolling settlement as on July 02, 2001, would be brought under compulsory rolling settlement with effect from January 02, 2002.
All the Stock Exchanges are therefore, advised to ensure that the companies which have not established connectivity with both the Depositories are advised to do so on or before September 30, 2001 so as to facilitate compulsory trading in rolling settlement effective from January 02, 2002.
A compliance report by all the Stock Exchanges in this regard should be submitted to us by October 15, 2001.
Yours faithfully,
G. S. REDDY
November 2001
November 2, 2001
·
Scheme for introduction of Single Stock Futures and the Risk
Containment Measures
August 2001
August 24, 2001
· Reporting of derivative transactions to
the media and the newspapers
June 2001
June 21, 2001
·
Adjustment of Corporate Actions for Stock Option
June 20, 2001
· Risk containment measures for Stock Option
· Reporting of option contracts to SEBI.
CHIEF
GENERAL MANAGER
DERIVATIVE CELL
SMDRP/DC/CIR- 10/01
November 2, 2001
To,
The Chief Executive Officer/ Managing Director
of Derivative Segment of NSE & BSE
and their Clearing House / Corporation.
Dear Sir,
Sub: Scheme for introduction of Single Stock Futures and the Risk Containment Measures.
This is in continuation of SEBI Circular No. IES/DC/CIR-4/99 dated July 28, 1999, Circular No. IES/DC/CIR-5/00 dated December 11, 2000 and Circular No. SMD/DC/Cir-10/01 dated June 20, 2001 wherein the risk containment measures for Exchange traded Index Futures, Index Option, and Stock Option Contracts were laid down.
SEBI has setup an Advisory Committee on Derivatives headed by Prof. J. R Varma. The Advisory Committee had recommended the introduction of Single Stock Futures in the Indian Securities Market. SEBI Board in its meeting on September 4, 2001 considered the recommendation of the Advisory Committee on Derivatives and granted in-principle approval for the introduction of futures on 31 stocks, in which options contracts have been permitted by SEBI. Further, the Board desired that the Advisory Committee on Derivatives,
On the risk containment measures the Advisory Committee on Derivatives agreed to adopt the existing risk management framework in the derivative market for Single Stock Futures. The committee asked SEBI to set various parameters like volatility estimates, price range, minimum margin level, calendar spread charges etc, in consultation with the exchanges.
The scheme of introduction and the risk containment measures for Single stock futures contracts framed in consultation with the stock exchanges, within the framework specified by the Advisory Committee on Derivatives, and approved by the SEBI Board in its meeting On November 1, 2001, are as follows-
The Board has approved the introduction of Single Stock Futures Contracts on 31 stocks on which option contracts have been introduced on BSE & NSE. The Advisory Committee on Derivatives shall review the eligibility criteria for introduction of futures and options on any other stock from time to time.
A portfolio based margining approach shall be adopted which will takes an integrated view of the risk involved in the portfolio of each individual client comprising of his positions in all Derivative Contracts i.e. Index Futures, Index Option, Stock Options and Single Stock Futures. The parameters for such a model should include the following-
The Initial Margin requirements are based on worst scenario loss of a portfolio of an individual client to cover 99% VaR over one day horizon across various scenarios of price changes and volatility shifts. For Index products the price scan range is specified at three standard deviation (3 sigma) and the volatility scan range is specified at 4%. For stock option contracts the price scan range is specified at three and a half standard deviation (3.5 sigma) and the volatility scan range is specified at 10%. There is also a minimum margin requirement. For index futures contracts it is specified that in no case the initial margin shall be less than 5% of the value of the contract. For index options a short option minimum charge of 3% of the notional value of all short index option has been prescribed and in the case of stock option contracts, a short option minimum charge of 7.5% of the notional value of all short stock option contract has been prescribed.
In the case of Single Stock Futures, the initial margin would be computed as the worst scenario loss of a portfolio comprising of all the positions of a client in all the futures and options contracts. For Single Stock Futures the price scan range would be 3.5 Standard Deviation (3.5 sigma) and in no case the initial margin for Single Stock Futures contract shall be less than 7.5% of the value of the Single Stock Futures contract. The SPAN margining system, which has been adopted by both BSE & NSE, does not have the provision to provide for charging a minimum margin of 7.5% for futures contracts. However, in order to achieve the requirement of minimum margin for the Single Stock Futures contract, the price scan range would be adjusted so as to ensure that the initial margin for Single Stock Futures contracts does not fall below 7.5% in any scenario. The standard deviation would be calculated as per the methodology specified in the Prof. J. R Varma Committee Report on the Risk Containment Measures for Index Futures.
The Initial Margin requirement shall continue to be
netted at level of individual client and shall be calculated on a gross basis
at the level of Trading / Clearing Member. The Initial margin requirement for
the proprietary position of Trading/Clearing member shall be calculated on a
net basis
On the introduction of option contracts, the margin
on calendar spread is calculated on the basis of delta of the portfolio
consisting of futures and option contract in each month. Thus, a portfolio
consisting of a near month option with a delta of 100 and a far month option
with a delta of –100 would bear a spread charge equal to the spread charge for
a portfolio which is long 100 near month futures and short 100 far month
futures. The Calendar Spread Margin is charged in addition to the Worst
Scenario Loss of the portfolio. A calendar spread would be treated as a naked
position in the far month contract as the near month contract approaches
expiry. A calendar spread is treated as a naked position in the far month
contract three trading days before the near month contract expires. The same
provision shall also apply for calendar spreads in Single Stock Futures
contracts.
It has been prescribed that the notional value of gross open positions at any point in time in the case of Index Futures and all Short Index Option Contracts shall not exceed 33 1/3 (thirty three one by three) times the liquid networth of a member, and in the case of Stock Option Contracts, the notional value of gross short open position at any point in time shall not exceed 20 (twenty) times the liquid networth of a member.
In the case of Single Stock Futures Contracts the value of gross open positions at any point in time in all the Single Stock Futures contracts shall not exceed 20 (twenty) times the available liquid networth of a member. Therefore, the exchanges would be required to ensure that 5% of the notional value of gross open position in Single Stock Futures contracts is collected /adjusted from the liquid networth of a member on a real time basis. Exposure limits are in addition to the initial margin requirements.
Exposure limit for calendar spreads in the case
of Single Stock Futures contracts: As prescribed in the case of index
futures contract, the Calendar Spread shall be regarded as an open position of
one third (1/3rd) of the mark to market value of the far month contract. As the
near month contract approaches expiry, the spread shall be treated as a naked
position in the far month contract three days prior to the expiry of the near
month contract. The same provision shall apply to the spread positions in
the case of Single Stock Futures contract. If the closing out of one leg of
a calendar spread causes the members’ liquid net worth to fall below the
minimum levels specified, his terminal shall be disabled and the clearing
corporation / house shall take steps to liquidate sufficient positions to
restore the members’ liquid net worth to the levels mandated.
The computation of Worst Scenario Loss has two components. The first is the valuation of the portfolio under sixteen scenarios. At the second stage, these Scenario Contract Values are applied to the actual portfolio positions to compute the portfolio values and the initial margin (Worst Scenario Loss). For computational ease, exchanges are permitted to update the Scenario Contract Values only at discrete time points each day and the latest available Scenario Contract Values would is applied to member/client portfolios on a real time basis.
However, in order to ensure that the most recent
scenario are applied for computation of the portfolio values and the initial
margin, on introduction of Single Stock Futures, it shall be prescribed
that the scenario contract values shall be updated atleast 5 times in the day,
which may be carried out by taking the closing price of the previous day at the
start of trading and the prices at 11:00 a.m., 12:30 p.m., 2:00 p.m., and at
the end of the trading session.
As prescribed in the case of index futures contract, the mark to market settlement of Single Stock Futures contracts shall also be collected before start of the next day’s trading, in cash. If mark to market margins is not collected before start of the next day’s trading, the clearing corporation/house shall collect correspondingly higher initial margin to cover the potential for losses over the time elapsed in the collection of margins. The higher initial margin shall be calculated in the same manner as specified in the Prof. J.R Varma committee reports on risk containment measures for index futures.
The daily closing price of Single Stock Futures Contract for Mark to Market settlement would be calculated on the basis of the last half an hour weighted average price of the contract. In the absence of trading in the last half an hour the theoretical price would be taken. The Derivative Exchanges/ Segment shall define the methodology of calculating the ‘theoretical price’ at the time of making an application for approval of the stock futures contract to SEBI and methodology for calculating the ‘theoretical price’ would also be disclosed to the market. In addition, the exchange shall also specify the methodology for arriving at the closing price at the time of expiry.
The initial margin (or the worst scenario loss)
plus the calendar spread charge shall be adjusted against the available Liquid
Networth of the member. The members in turn shall collect the initial margin
from their clients.
On the introduction of index futures contracts, index options contracts and stock options contracts the trading member level and the market wide position limits were prescribed. However, with the introduction of Single Stock Futures contracts, a customer level position limit is also prescribed to deter and detect concentration of positions and market manipulation. The market wide position in the case of stock specific derivative contract (both stock options and Single Stock Future) shall be applicable on the cumulative open positions in derivative contracts on that that stock at an Exchange. The volumes in the derivative markets are growing steadily and therefore, position limits shall be reviewed by the Advisory Committee on Derivatives from time to time and also the Advisory Committee shall be empowered to weed out any operational issue in implementation of the position limits.
Client / Customer level position limits:
The gross open position across all derivative contracts on a particular underlying of a customer/client should not exceed the higher of –
or
This position limits would be applicable on the combine position in all derivative contracts on an underlying stock at an exchange.
At present the trading system of the exchange requires that client ID should be provided for each trade. However, this client ID is assigned by the trading member is not unique to a client across the market. At present the exchange monitors the trading member level position limits however, the client wise limit is not monitored by the exchange and is a requirement of disclosure by the client to the trading member and to the Exchange. With the introduction of Single Stock Futures Contracts the exchanges shall develop a system to monitor client level position limits through their computer system not only with respect to one trading member but also across all the trading members through whom the client is trading in the derivative markets. This would be in addition to the disclosure requirement prescribed for clients. This would require setting up of a system and database which would capture all the details of clients of all the trading members. The system then would identify a common client, who may be trading through more than one trading member, on the basis of some key fields. The setting up of such a database and the system would be required to be completed in a time bound manner in various stages as under: -
Trading Member Level:
At the trading member level the position limit in derivative contracts on a particular stock would be at 7.5% of the open interest or Rs 50 crore whichever is higher for derivative contract in a particular underlying at an exchange. The exchanges shall however specify lower Trading Member level limits for generating surveillance alerts.
Once a member reaches the position limit in a particular underlying then the member shall be permitted to take only offsetting positions (which result in lowering the open position of the member) in derivative contracts on that underlying. In the event, that the position limit is breached due to the reduction in the overall open interest in the market, the member shall be permitted to take only offsetting positions (which result in lowering the open position of the member) in derivative contract in that underlying and no fresh positions shall be permitted. The position limit at trading member level shall be computed on a gross basis across all clients of the Trading member.
Market wide limits:
The market wide limit of open positions (in terms of the number of underlying stock) on an option and futures contract on a particular underlying stock would be lower of –
or
This market wide limit prescribed for stock option contracts has been increased from 20 time the average number of shares traded daily to 30 times as these limits would be applicable for both futures and options contracts on a particular underlying stock. Therefore, all the open position in all futures and option contracts on a particular underlying should not exceed the aforementioned market wide position limit.
When the total open interest in a contract reaches 80% of the market wide limit in that contract, the exchanges would double the price scan range and volatility scan range specified. The exchanges are required to continuously review the impact of this measure and take further proactive risk containment measures as may be appropriate, including, further increases in the scan ranges and levying additional margins. Additionally, the exchanges may also set alerts at lower levels for internal surveillance.
Yours
sincerely,
N. PARAKH
SECURITIES AND EXCHANGE BOARD
OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021
SMD/DC/Cir-9/01
August 24, 2001
To,
The Chief Executive Officer
of Derivative Segment of NSE & BSE
Dear Sir,
Reporting of derivative transactions to the media and the newspapers.
In the meeting of the derivative exchange/segments, held on August 2, 2001, it was decided that reporting of derivative transactions to the media and the newspapers should be in a uniform format.
Accordingly, the Derivative Exchanges / Segments and their Clearing House/Corporation are required to report the following details for the transactions in derivative contracts, to the media/newspapers, on a daily basis:
Yours
sincerely,
(N. PARAKH)
CHIEF GENERAL MANAGER
DERIVATIVE CELL
SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021
SMDRP/DC/CIR- 8/01
June 21, 2001
To,
The Chief Executive Officer/ Managing Director
of Derivative Segment of NSE & BSE
and their Clearing House / Corporation.
Dear Sir,
Sub: Adjustment of Corporate Actions for Stock Option.
The ‘Technical Group’ headed by Prof. J.R Varma, set up to prescribe risk containment measures for new derivative products, has recommended the risk containment measure for Exchange traded Stock Option Contracts. The Technical Group had set up a sub group comprising officials of BSE & NSE to determine a common methodology for adjusting corporate actions on Stock Options. Based on the recommendation of the sub-group, the Technical Group decided that since options on common stock would be trading on both NSE & BSE the corporate adjustment for the Option on the same underlying should be uniform across markets. While a uniform adjustment methodology could be adopted for certain corporate action, it would be difficult to specify any uniform policy for all corporate actions at this stage. For this purpose, it has been decided to constitute a group comprising NSE, BSE and other knowledgeable persons, which would decide a uniform course of action for adjusting stock option contracts on corporate actions, taking into account best practices followed internationally, where a uniform criterion cannot be laid down at persent. However, certain adjustments for Corporate Actions for Stock Options would be as follows:
1) The basis for any adjustment for corporate action shall be such that the
value of the position of the market participants on cum and ex-date for
corporate action shall continue to remain the same as far as possible. This
will facilitate in retaining the relative status of positions viz.
in-the-money, at-the-money and out-of-money. This will also address issues
related to exercise and assignments.
2) Any adjustment for corporate actions shall be carried out on the last day on which a security is traded on a cum basis in the underlying cash market.
3) Adjustments shall mean modifications to positions and / or contract specifications as listed below such that the basic premise of adjustment laid down under 1. above is satisfied :
a) Strike Price
b) Position
c) Market Lot / Multiplier
The adjustments shall be carried out on any or all of the above based on the nature of the corporate action. The adjustments for corporate actions shall be carried out on all open, exercised as well as assigned positions.
4) The corporate actions may be broadly classified
under stock benefits and cash benefits. The various stock benefits declared by
the issuer of capital are :
5) The methodology proposed to be followed for adjustment of various corporate
actions to be carried out are as follows :
Bonus, Stock Splits and Consolidations
Strike Price: The new strike price shall be arrived at by dividing the old
strike price by the adjustment factor as under.
Market Lot / Multiplier: The new market lot / multiplier shall be arrived
at by multiplying the old market lot by the adjustment factor as under.
Position: The new position shall be arrived at by multiplying the old position
by the adjustment factor as under.
The adjustment factor for Bonus, Stock Splits and Consolidations is arrived at as follows:
Bonus
Ratio – A : B Adjustment factor : (A+B)/B
Stock Splits and Consolidations
Ratio – A : B Adjustment factor : B/A
Right
Ratio – A : B Premium – C Face Value – D Existing Strike Price : X
New Strike Price : ((B * X) + A * (C + D))/(A+B)
Existing Market Lot / Multiplier / Position: Y
New issue size : Y * (A+B)/B
The above methodology may result in fractions due to the corporate action e.g. a bonus ratio of 3:7. With a view to minimizing fraction settlements, the following methodology is proposed to be adopted:
1. Compute value of the position before adjustment
2. Compute value of the position taking into account the exact adjustment
factor
3. Carry out rounding off for the Strike Price and Market Lot
4. Compute value of the position based on the revised strike price and market
lot
The difference between 1 and 4 above, if any, shall be decided in the manner laid down by the group by adjusting Strike Price or Market Lot, so that no forced closure of open position is mandated.
6) Dividends which are below 10% of the market value of the underlying stock, would be deemed to be ordinary dividends and no adjustment in the Strike Price would be made for ordinary dividends. For extra-ordinary dividends, above 10% of the market value of the underlying stock, the Strike Price would be adjusted.
7) The Exchange may on a case to case basis carry
out adjustments for other corporate actions as decided by the group in
conformity with the above guidelines.
Yours
sincerely,
(N.PARAKH)
CHIEF GENERAL MANAGER
DERIVATIVE CELL
SECURITIES AND EXCHANGE BOARD
OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021
SMDRP/DC/CIR- 7/01
June 20, 2001
To,
The Chief Executive Officer/ Managing Director
of Derivative Segment of NSE & BSE
and their Clearing House / Corporation.
Dear Sir,
Sub: Risk containment measures for Stock Option.
This is in continuation of SEBI Circular No. IES/DC/CIR-4/99 dated July 28, 1999 & Circular No. IES/DC/CIR-5/00 dated December 11, 2000 wherein SEBI had laid down the risk containment measures for Exchange traded Index Futures and Index Option Contracts.
SEBI has setup a ‘ Technical Group’ headed by Prof. J.R Varma to prescribe risk containment measures for new derivative products. The group has recommended the introduction of Exchange traded Options on Stocks, which is also in conformity with the sequence of introduction of derivative products recommended by Dr. L.C Gupta Committee.
The ‘Technical Group’ has recommended the risk containment measure for Exchange traded Options on Stocks. While SEBI would not mandate any particular risk management product, the framework shall be consistent with the risk management guidelines mandated by the L. C. Gupta Committee. The Exchanges are free to decide whether they want to adopt any of the risk management models available globally or else may like to develop their own models for risk management.
The following are the risk containment measures to be adopted by the derivative exchange/segment and the Clearing House/Corporation for the trading and settlement of Option Contracts on Stocks:
The worst case loss of a portfolio would be calculated by valuing the portfolio
under several scenarios (as specified in SEBI Circular No. IES/DC/CIR-5/00
dated December 11, 2000) of changes in the Stock prices and changes in the
volatility of the Stock. The price range for generating the scenarios for Stock
Option Contracts would be three and a half standard deviation (3.5 Sigma). The
sigma value would be calculated using the methodology specified for Index
Futures as per the Prof. J.R Varma Committee Report. The volatility range for
generating scenarios for Stock Options would be taken at 10% for an initial
period of six months, after which it shall be reviewed.
For the purpose of the calculation of option values the exchanges may use any of the following standard Option Pricing Models – Black-Scholes, Binomial, Merton, Adesi-Whaley.
The maximum loss under any of the scenario is
referred to in this circular as the Worst Scenario Loss. Subject to the
additions and adjustments mentioned hereunder, the Worst Scenario Loss shall be
the margin requirement for the portfolio.
A Short Option Minimum Margin equal to 7.5 % of the Notional Value based on the
previous days closing value of the underlying stock, of all short stock options
shall be charged if sum of the Worst Scenario Loss is lower than the Short
Option Minimum Margin for the given underlying.
The Net Option Value shall be calculated as the current market value of the
option times the number of options (positive for long options and negative for
short options) in the portfolio. This Net Option Value shall be added to the
Liquid Net Worth of the clearing member. This means that the current market
value of short options will be deducted from the Liquid Net Worth and the
market value of long options will be added thereto. Thus market to market gains
and losses on option positions will get adjusted against the available Liquid
Net Worth. Since the options are premium style, mark to market gains and losses
will not be settled in cash for stock option positions also.
For the Stock Option positions, the premium shall be paid in by the buyers in
cash and paid out to the sellers in cash on T+1 day.
The Exchanges are free to set exercise limits, if any, for the Stock Option
Contracts. The assignment of all exercise shall be done randomly at the client
level by the Exchange and its Clearing House.
Until the buyer pays in the premium, the premium due shall be deducted from the available Liquid Net Worth on a real time basis.
The notional value of gross open positions at any point in time for Index Futures and all Short Index Option Contracts shall not exceed 33 1/3 (thirty three one by three) times the liquid networth of a member, and in case of Stock Option Contracts, the notional value of gross short open position at any point in time shall not exceed 20 (twenty) times the liquid networth of a member.
Therefore, the exchanges are required to ensure that 3% of the notional value of gross open position in Index Futures & Short Index Option Contracts, and in the case of Stock Options, 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.
It is further clarified that the notional value of the options contract would be calculated on the basis of the previous days closing value of the underlying.
The existing member wise position limits in the Index Futures and Index Options market shall be applicable to Stock Options also on the basis of notional value of the contract. In addition, a market wide limit on the open position on stock option contract is also prescribed. The market wide limit of open positions (in terms of the number of underlying stock) on an option on a particular stock shall be lesser of –
1. 20 times the average number of shares traded daily, during the previous calendar month, in the cash segment of the Exchange,
or
1. 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.
When the total open interest in a contract reaches 80% of the market wide limit in that contract, the exchanges would double the price range and volatility range as specified in Point No. (A) in this circular. The exchanges are required to continuously review the impact of this measure and take further proactive risk containment measures as may be appropriate, including, further increases in the scan ranges and levying additional margins. The cash market segment of the Exchange should be informed of these developments so as to enable the cash segment also to take such risk containment and surveillance measures as may be appropriate.
I.
The computation of Worst Scenario Loss has two components. The first is the
valuation of
each option contract under sixteen
scenarios using an appropriate option pricing model. The
second is the application of these
Scenario Contract Values to the actual positions in a
portfolio to compute the portfolio values
and the Worst Scenario Loss. For computational
ease, exchanges are permitted to update
the Scenario Contract Values only at discrete time
points each day. However, the latest
available Scenario Contract Values would be applied
to member/client portfolios on a real time
basis.
7. Eligibility of Stocks for Option trading
The stocks which would be eligible for option trading, should meet the following criterion:
The volatility estimates calculated as mentioned in Point No.(v) above shall be calculated on the last one and a half year closing price data in the following manner:
In the calculation mentioned above the closing prices of stocks should be normalised / adjusted for corporate actions like bonus, stock split, demerger etc.
At the end of six months from the date of
introduction of trading in stock options, it should be verified whether the
stocks on which options is permitted continues to comply with the
aforementioned criterion. The eligibility criterion would be reviewed after a
period of six months to examine whether, in light of the experience, the list
of eligible stocks could be expanded.
8. The Derivative Exchange/Segment shall submit their proposal for approval of the stock option contract to SEBI which shall include:
Yours
sincerely,
(N. PARAKH)
CHIEF GENERAL MANAGER
DERIVATIVE CELL
SECURITIES AND EXCHANGE BOARD
OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021
SMD/DC/CGM/ CIR - 6/01
June 20, 2001
To:
The CEO – Derivatives Segment/ F&O Segment,
The National Stock Exchange Of India Ltd,
The Stock Exchange, Mumbai.
Dear Sir,
Reporting of option contracts to SEBI.
In continuation of our circular dated June 20, 2000 on reporting of derivative contracts to SEBI, you are advised to provide the additional information, as per the attached sheet, for each derivative contract, on a daily basis. Required information should be submitted to SEBI at the end of each trading day, by 5 P.M.
Yours faithfully,
(N. PARAKH)
CHIEF GENERAL MANAGER
DERIVATIVE CELL
Reporting of option contracts for the …….(date)
|
|
||||||
|
Product |
Series |
Type |
Volume (in number of contracts) |
Notional Value (in Rs. Crores) |
Open interest at the end of the day (in no. of contracts) |
VAR at the close of the day. |
|
Index options/ Stock |
June |
Call |
|
|
|
|
|
Put |
|
|
|
|
||
|
July |
Call |
|
|
|
|
|
|
Put |
|
|
|
|
||
|
August |
Call |
|
|
|
|
|
|
Put |
|
|
|
|
||
|
Mutual Funds Circulars 2001 DECEMBER 2001 Decembr 20, 2001 · Independent
Directors on Boards of AMCs and Trustee Companies · Certification Programme and Disclosure Standards. · Gazette Notification dated 23/7/2001, Investments by MFs in
Venture Capital Funds and Payment of Volatility Margins by MFs' · Clients Codes For Mutual Funds · Discontinuing Monthly Statistical Reports (MSTATS) · Putting Standard Observation on Website · 'Restriction on payment of brokerage/commission on prospective
basis and only in case of sponsor investments' · Investment/Trading in Securities
by Employees of Asset Management Companies and Mutual Fund Trustee Companies
· Large Unit Holdings and Brokerage on associate applications
· Validity of Scheme Offer Documents · Format for Half Yearly
Disclosure of Unaudited Financial Results · Gazette Notification dated 23/1/2001 & publication of NAV of close ended schemes on Wednesday · Modifications in Guidelines for valuation of securities and
identification and provisioning of NPAS · Launch of Additional Plans under existing schemes · Disclosure of NAVs on AMFI website · Guidelines for updation of offer document, time frame for
despatch of dividend warrants and reporting of securities transactions by
Directors of AMCS on Quarterly basis Circulars prior to 1.1.2001
|
|
|
CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT
MFD/CIR/11/ 354/ 2001
December
20, 2001
All
Mutual Funds Registered with SEBI
Unit
Trust of India
AMFI
Dear Sirs,
Sub: Independent Directors on Boards of AMCs and Trustee Companies.
As you are aware, the concept of independent directors on the Boards of asset management companies (AMCs) and trustee companies has been introduced in SEBI (Mutual Funds) Regulations, 1996 for better corporate governance, to bring about transparency in the operations of mutual funds and to protect the interests of investors. With a view to implement the regulations in this regard in letter and spirit, the following clarifications are being issued.
For the sake of clarity and to avoid any ambiguity, an example is given here. Supposing an employee of the sponsor or their associate companies or AMC or trustee company resigns on December 1, 2001, then he cannot be appointed as an independent director till December 1, 2004. During this intervening period, he can be appointed only as associate director. However, once he is taken as an associate director, say on December 2, 2001, he cannot be considered as "independent" from December 2, 2004. There must be a cooling off period of 3 years from the date he ceases to be an associate director.
4. The clarifications in Clauses 1-3 above shall be followed in case of directors of trustee companies and AMCs.
Please classify your existing directors of AMC and trustee company as "associates" or "independent" in the light of the aforesaid clarifications and inform us if the composition of directors does not comply with the requirement of 50% or 2/3rd independent directors of AMC or trustee company. In future also, whenever the composition falls below the requirements due to resignation or any other reason please inform us immediately and also the steps proposed to be taken by you to ensure compliance with the Regulations.
Your attention is drawn to Regulation 18(25)(A)(i) of SEBI (Mutual Funds) Regulations, 1996 which requires the trustees to be discerning in the appointment of the directors on the Board of the asset management company. Further, under Regulations 18(27)(iii) and (v), the independent directors of the trustee or asset management company are required to pay specific attention to the selection and nomination of individuals to fill the vacancies of independent directors.
Considering the above clarifications and provisions in the Regulations, the format for sending the bio-data of directors of AMCs and trustees to SEBI has been revised and is enclosed herewith. You are advised to use this format in the future while sending the bio-data of the new directors of AMC or trustee company for our information or approval as the case may be. New directors should also be informed about their responsibilities and rights as specified in the Regulations.
This
circular is being issued in accordance with the provisions of Regulation 77 of
SEBI (Mutual Funds) Regulations, 1996.
Yours
faithfully,
P. K. NAGPAL