SLB - Margins
All transactions under SLBS are subject to margins. Following margins are applicable for transactions under SLBS.
The following margins are levied in respect of first leg of transactions under SLBS.
Borrow transaction
The borrower is levied only the Lending fee on T day.
Lend transaction
Lenders may bring in early pay-in of securities on the day of the transaction execution itself. In such cases no margins are levied on the lender.
The following margins are levied on the Participants for lend transactions till the time the pay-in of securities:
- Mark to Market Margins at EOD
- 25% of the Lending price
Borrow transaction- Reverse leg
The borrower is levied margins in respect of reverse leg of transactions under SLBS. The following margins are levied on the Participants for a borrow transaction from T+1 to the reverse leg settlement day.
- Value at Risk Margins
- Extreme Loss Margins
- Mark to Market Margins
- Lending price
Lending price is collected in the form of cash or cash equivalents as prescribed by NSE Clearing.
Borrowers may do an early repayment of securities in NSE Clearing’s repayment account any time during the tenure of the borrowal period for availing of margin benefits.
Lend transaction- Reverse leg
The Lender would not be charged any margins for the reverse leg.
Early Recall Transaction
In case of early recall transaction the transacted lending fee for the recall transaction is levied as margin till the pay-in of lending fee the next day.
Early Repayment Transaction
There are no margins levied for early repayment transactions
- VaR margin rate as applicable to the security in the capital market segment are applicable in the SLBS.
- The VaR margin is collected on an upfront basis by adjusting against the collateral of the Participant at the time of transaction.
- The VaR margin is collected on the gross open position of the Participant. The gross open position for this purpose would mean the gross of all positions across all the clients of a Participant including its proprietary position.
- VaR margin rate for each security is disseminated to the Participants through the Extranet and on the website of the Exchange.
- The VaR margin so collected is released on completion of pay-in of the respective settlement.
- Extreme Loss margin (ELM) rate as applicable to the security in the capital market segment is applicable in the SLBS.
- The Extreme Loss margin is collected on an upfront basis by adjusting against the collateral of the Participant at the time of transaction.
- The Extreme Loss margin is collected on the gross open position of the Participant. The gross open position for this purpose would mean the gross of all positions across all the clients of a Participant including its proprietary position.
- The Extreme Loss margin so collected is released on completion of pay-in of the respective settlement.
- Mark to market loss is calculated by marking each transaction in security to the closing price of the security at the end of day in the capital market segment. In case the security has not been transacted on a particular day in the capital market segment, the latest available closing price at the NSE is considered as the closing price
- The mark to market margin (MTM) is collected from the Participant before the start of the SLBS session of the next day.
- The MTM margin is collected /adjusted from/against the collateral deposited by the Participant.
- The MTM margin is collected on the gross open position of the Participant. The gross open position for this purpose would mean the gross of all positions across all the clients of a Participant including its proprietary position. For this purpose, the position of a client would be netted across its various securities and the positions of all the clients of a Participant would be grossed.
- There would be no netting off of the positions and setoff against MTM profits across two settlements However, for computation of MTM profits/losses for the day, netting or setoff against MTM profits would be permitted.
- The MTM margin so collected is released on completion of pay-in of the settlement.
Payment of Margins
Exemption from margins in case of Early Pay-in
In cases where early pay-in of securities is made prior to the securities pay-in, such positions for which early pay-in (EPI) of securities is made are exempt from margins.
Custodial transactions
In respect of transactions entered by a Participant which is to be settled by a custodian, the margins from the time of transactions till confirmation by the custodian are levied on the Participant. On confirmation of the said transactions by the custodian, the custodian is levied the margins applicable on such transactions. In case of rejection by the custodian, the margins on the transaction rejected continue to be levied on the Participant.
Short fall of margins
In case of any shortfall in margin the Participant is not be permitted to transact in SLBS with immediate effect. The same is considered as violation and would attract penal charges as may be specified by NSE Clearing from time to time.
Margins from the Client
Participants should have a prudent system of risk management to protect themselves from client default. Margins are likely to be an important element of such a system. The same should be well documented and be made accessible to the clients and NSE Clearing. However, the quantum of these margins and the form and mode of collection are left to the discretion of the Participants.
Margin Shortages - Reverse leg
In case the borrower fails to meet the margin obligations, NSE Clearing shall obtain securities and square off the position of such defaulting borrower, failing which there shall be a financial close-out.
Lending price
- Lending price refers to the previous day closing price of the security in the capital market segment i.e. T-1 day closing price in the capital market segment.
- 25% of the lending price is levied as margin on the Participants for lend transactions on T day. This is released on completion of pay-in of T+1 settlement.
- 100% of the Lending price is levied as margin on the Participants for borrow transactions starting from T+1 day till the shares are returned by the borrower.
- This is collected on an upfront basis by adjusting against the collateral of the Participant at the time of transaction.
- This is collected on the gross open position of the Participant. The gross open position for this purpose would mean the gross of all positions across all the clients of a Participant including its proprietary position.
- The margin so collected is released on completion of pay-in of the respective settlement.
Lending fee
- Lending fee refers to the actual price of the transaction at which the transaction is executed. Lending fee per share is quoted by the participants while entering in to SLB Transactions. Lending fee obligation is the lending fee per share*quantity of shares borrowed/lent.
For e.g. If a transaction is executed at Rs 5 per share for 100 shares of Security "X" then the total lending fee obligation for the borrower for security "X" will be Rs. 500. - Lending fee is levied as margin on the Participants for borrow transactions on T day on an upfront basis.
- This is collected on an upfront basis by adjusting against the collateral of the borrower at the time of transaction.
The margin so collected is released on completion of pay-in on T+1 settlement date.
Updated on: 03/01/2023
