To

All Members/Participants,

This is with reference to SEBI circular ref no: SEBI/HO/MRD/DOP1/CIR/P/2019/128 dated November 08, 2019 on captioned subject. Member are hereby informed that ICCL has received SEBI approval to provide cross margin benefit on off-setting positions in futures on equity indices pairs as per criteria prescribed in aforesaid circular.

Eligible Indices

SEBI in para 3(a) of aforesaid circular mentions that cross margin benefit on off-setting positions in futures on equity indices pairs which satisfy the below mentioned conditions:

    i.      A positive correlation of more than 0.90 for a period of six months between the values of the equity Indices and

   ii.      At least 80% of constituents of one of the index is present in the other index and 

  iii.      The constituents of smaller index based on free float market capitalization shall have at least 80% weightage in the larger index based on free float market capitalization

Based on the above criteria and as per approval received from SEBI, ICCL shall provide cross margin benefit to the extent of off-setting positions in Equity Derivatives segment in the following 7 index pairs:

    i.      NIFTY 50 and S&P BSE SENSEX

   ii.      NIFTY 50 and S&P BSE SENSEX 50

  iii.      NIFTY BANK and S&P BSE BANKEX

  iv.      S&P BSE SENSEX and S&P BSE SENSEX 50

   v.      S&P BSE SENSEX and SX40

  vi.      S&P BSE SENSEX 50 and SX40

 vii.      NIFTY 50 and SX40

Eligibility Criteria

As specified in para 3(b) of the aforementioned SEBI Circular, ICCL shall check the eligibility criteria as under:

    i.      on a monthly basis on the 15th of every month

   ii.      on the day of change in the constituents of the equity indices

If the equity indices pairs fail to fulfil any of the abovementioned eligibility criteria, cross margining benefit shall not be given after the upcoming monthly expiry.

Positions eligible for cross margining benefit

Cross margining benefit shall be available in the Equity Derivatives segment. Cross margining benefit shall be available to all categories of market participants.

    i.      In order to extend the cross-margin benefit, ICCL shall specify the ratio applicable for off-setting positions in futures on equity indices pairs on the website from time to time.

   ii.      The positions in index futures shall be in the same expiry month to be eligible for cross margining benefit.

  iii.      The position in an index shall be considered only once for providing cross margining benefit. E.g. Positions in Index A used to set-off against Index B shall not be considered again if there is an off-setting positions in Index C or constituent stocks/ETFs in Equity Cash segment or constituent stock futures in Equity Derivatives segment.

  iv.      Positions in option contracts shall not be considered for cross margining benefit.

Computation of cross margin

    i.      The computation of cross margining benefit shall be done at client level on an online real time basis and provided to the trading member / clearing member, as the case may be, who, in turn, may pass on the benefit to the respective client.

   ii.      The positions in the Equity Derivatives segment shall be considered for cross margining only till time the margins are levied on such positions.

  iii.      The positions which are eligible for offset, shall be subject to spread margins.

  iv.      The spread margins shall be atleast 30% of the applicable upfront margins on the offsetting positions in futures on equity indices pairs.

   v.      The difference in the margins on the total portfolio and on the portfolio excluding offsetting positions considered for cross margining, less the spread margins shall be considered as cross margining benefit.

All other provisions relating to cross margining shall continue to remain applicable. The effective date of implementation of provisions of this circular shall be informed subsequently.

For and on behalf of Indian Clearing Corporation Ltd.

Piyush Chourasia

Chief Risk Officer & Head – Strategy