Violations

PRISM (Parallel Risk Management System) is the real-time position monitoring and risk management system for the Futures and Options market segment at NSE Clearing. The risk of each trading and clearing member is monitored on a real-time basis and alerts/disablement messages are generated if the member crosses the set limits.

Clearing members, who have violated any requirement and / or limits, may reduce the position by closing out its existing position or, bring in additional cash deposit by way of cash or bank guarantee or FDR or securities. Similarly, in case of margin violation by Trading members, clearing member has to set its limit for enablement.

Initial Margin violation

The initial margin on positions of a CM is computed on a real time basis i.e. for each trade. The initial margin amount is reduced from the effective deposits of the CM with the NSE Clearing. For this purpose, effective deposits are computed by reducing the total deposits of the CM by Rs.50 lakhs (referred to as minimum liquid networth). The CM receives warning messages on his terminal when 70%, 80%, and 90% of the effective deposits are utilised. At 100% the clearing facility provided to the CM is withdrawn. Withdrawal of clearing facility of a CM in case of a violation will lead to withdrawal of trading facility for all TMs and/ or custodial participants clearing and settling through the CM.

Similarly, the initial margins on positions taken by a TM are computed on a real time basis and compared with the TM limits set by his CM. The initial margin amount is reduced from the TM limit set by the CM. Once the TM limit has been utilised to the extent of 70%, 80%, and 90%, a warning message is received by the TM on his terminal. At 100% utilization, the trading facility provided to the TM is withdrawn.

A member is provided with warnings at 70%, 80% and 90% level before his trading/ clearing facility is withdrawn. A CM may thus accordingly reduce his exposure to contain the violation or alternately bring in Additional Base Capital.

Extreme loss margin Violation

This violation occurs when the exposure margin of a Clearing Member exceeds his Minimum liquid networth, at any time, including during trading hours. The liquid net worth means the effective deposits as reduced by initial margin and net buy premium. In case of violation, the clearing facility of the clearing member is withdrawn leading to withdrawal of the trading facilities of all trading members and/ or clearing facility of custodial participants clearing through the clearing member.