Framework Content & Area’s to be covered

  • Objectives & Key roles
  • Client Cash / Pay-in & Pay-out
  • Margin & Exposure
  • Pledge & Re – Pledge mechanism
  • Surveillance & Mark-to-Market Square-OFF
  • Margin shortfall / Peak Margin & DRS (Debt Recovery System)
  • Derivatives Expiry & Compulsory Delivery
  • MCX / Commodity Tender & Physical Delivery
  • Equity Settlement Obligations & Corporate actions

 

OBJECTIVE & KEY ROLES

In the capital market risk management is one of the most important aspects to avoid any future financial risk; it becomes important and a mandate to manage risks effectively as it not only affects the organization but it also affects their clients. It is a practice that is required and followed by every business irrelevant of its size and nature. It aims at recognizing the potential threats in advance and takes all necessary steps to avoid their adverse effects on business operations. The framework which is created is effectively & commonly applicable for all clients. It’s clearly understood that risk is an integral part of any financial system, hence policy frameworks are mandatory to make it efficient and robust. Guidelines would also help in fixing margin irregularities if any. Also, the guidelines are tentative & subject to change without notice based on the market scenario. This framework will contain all the integrated business products of our company & all exchange segments like viz., Equity / Equity Derivatives / Commodity Derivatives / Currency Derivatives / Mutual Funds / Depository Regulations, etc. It’s very important for an Investor or a Business partner to know about policies bought forward by Exchange & Regulators to mitigate the risk involved. Therefore via this, the client should be able to decide or bifurcate & invest his / her hard-earned money in light of the financial condition. Client & Business partners are requested to strictly abide to the market regulations & Broker policy frameworks to avoid any future inconveniences.

A high percentile of importance has been given for Derivatives Segment in this framework. It must be acknowledged and accepted that there can be no guarantee of profits or no exception from losses while executing orders for purchase and/or sale of a derivative contract being traded on Stock exchanges.

KEY ROLES

  • Identify & Evaluate.
  • Streamline process accordingly to the environment.
  • Reduce & Eliminate Harmful threats.
  • Ensure service reach to end consumer.
  • Support efficient utilization of resources.
  • Better communication of risk with desired authorities & Business partners.
  • Assurance of smooth fullness in business.
  • Effective control over the business.

 

Client Cash

 It’s nothing but the clear cash balance available in the client’s ledger after detection of certain charges like “VIRTUAL BLOCK” etc.  Remember Zebu uses SINGLE MARGIN concept of margining a very unique & best in Industry. The single margin concept auto-adjusts the entire available margin in the client ledger and it ensures equal distribution of funds in different segments accordingly to the Bills & JV’s posted.

Pay-in

 Zebu facilitates client’s pay-in with the latest state of art technologies including private Broker payment Gateway services etc. Zebu uses a robust & unique technology in this case. Remember your payment’s made via ATOM (Application payment gateway) IMPS / RTGS / NEFT / ECMS will get auto-credited within a few min after KYC validation & Bank servers ensure completion of the transactions.

Bank transfers from banks that are under RBI guidelines and registered under them are only accepted.  No Cash Deposits / Money Transfer’s (Private Transfer agents) & DD’s favoring the company are accepted. It’s important to make a note that payment’s made from banks other than the registered bank account as per KYC will be termed as “THIRD PARTY PAYMENT” and reversal will be initiated only to the source account in case of online payment & KYC registered bank account in case of CASH DEPOSITS made, also note TAT time for reversal will be T+3 days & its chargeable.

Cheque deposits & Private UPI application payments are also accepted.

Tickets can be created with our payment’s ticketing mechanism if payment transfer like viz., IMPS / RTGS / NEFT / ECMS is not credited within 15 – 30 min of the transaction completion. Note – Tickets are mandatory for uncredited payments & UPI’s / Cheque in which proof payment has to be attached containing the account number which is used by the PAY-IN team to validate the payment.

Please raise your tickets on payin@zebuetrade.com 

Pay-out

You can reach us via our support numbers (+91 9380108010) to mark your payouts. We are available from 8 am to answer your calls & queries. You can also raise a ticket to mark your payout. Remember to mark a same-day payout the above has to be done within 8.30 am the same day of payout. To avoid & to beat the crowd you also have been provided with a Back Office console & your trading applications are pre-enabled with the specific feature to mark a payout.

Note: Clients with 2 KYC-linked bank accounts may note that the payout will be processed only to the Primary bank account of the client.

 

Margins & Exposure

Type of Margins: Cash Component & Non-Cash Component

Cash Components – Cash Credit of client / Fixed Deposits

Non – Cash Component – Pledged Securities (After HC) / Mutual Funds (After HC) / others as prescribed by the exchange from time to time.

The Margin is a main & underlying stake provided by the client to facilitate his trade in the form of Cash / Stocks to mitigate the market risk involved. The Stock exchanges in our country follow a unique & separate margin requirement mechanism for each segment separately. The requirements of each segment are bifurcated separately below. The new pledge/re-pledge mechanism which was introduced by the regulator was implemented by August 2020 changed the way in client margin usage both in Intra-day & Portfolio trading. It was made mandatory by Zebu as required by the regulator to pledge the securities with the broker and avail margins via the same. The prescribed list of Approved Securities by the exchange was used as a reference to pick selected stocks for this process based on its VAR (Haircut) components of the stock.

Equities (NSE & BSE)

The following products are currently available for trade-in this segment CO / BO / MIS / CNC. The discretion of enabling & disabling the above products based on market risk perspective entirely lies with Zebu RMS. The exposure regulation in this segment will change from time to time as prescribed by the regulator & Zebu reserves the right to change it anywhere in the calendar trade date accordingly to market risk perspective. Pledged securities with the broker can be used for Intra-day margins in products like CO / BO / MIS. Pledged securities margin with the broker can’t be used for CNC products in the Equity segment. CNC works only on 100 % margin requirement.

Note – The new peak margin regulations are applicable as prescribed by the regulator in a phased manner. Only 80% of the sale proceeds can be used for same-day margining in any segment. The Intra-day exposure in the equity segment goes up to a maximum side as per the daily changing VAR + ELM perspective of the stock. The Higher VAR of the stock lowers the exposure of the stock you trade. A detailed calculation link has been provided below.

https://www1.nseindia.com/live_market/dynaContent/live_watch/margincalc/CMInputMargincalc.jsp

 

Derivatives ( Equity / Currency & Commodity Derivatives ) (NSE & BSE)

A. Futures

The Derivatives segment work in a way with SPAN & LTP proceedings from the previous day. SPAN (Standard Portfolio Analysis of Risk) used by NSE Clearing is a portfolio-based margining process. Span + Exposure = Initial Margin (Total Margin). The Trading Member (Zebu) is required to collect the Upfront Initial Margin from the client. These Initial Margins are based on 95 – 99 % Value at Risk perspective. The SPAN initially provided over BOD (Beginning of the Day) has multiple personalities to change itself up to 4 times a day, based on the movement of the market. The exposure regulation in this segment will change from time to time as prescribed by the regulator & Zebu reserves the right to change it anywhere in the calendar trade date accordingly to market risk perspective. Pledged securities with the broker can be used for both Intra-day & Portfolio trading & products like CO / BO / MIS & NRML.

 Note – The new peak margin regulations are applicable as prescribed by the regulator in a phased manner. The Intra-day exposure in the equity derivatives segment goes up to a maximum of 100% of (SPAN + Exposure).

B. Options (Index Options / Stock Options / Currency / Commodity )

The Options trading in the derivative segment uses the same mechanism as futures but with a few component changes. One has to pay the Option premium as the initial margin in case of Options long position & SPAN + EXPOSURE if it’s a short position. The exposure regulation in this segment will change from time to time as prescribed by the regulator & Zebu reserves the right to change it anywhere in the calendar trade date accordingly to market risk perspective. Pledged securities with the broker can be used for Intra-day & Portfolio margins in products like MIS & NRML.

Note – The new peak margin regulations are applicable as prescribed by the regulator in a phased manner. The margin requirement for Intra-day trade in all segments is 100% of (SPAN + Exposure). It has to be noted that no CO & BO orders are available to trade in the Options segment. Intra-day or MIS is available only for IDXOPT (Index Options) and not for STKOPT (Stock Options) CUROPT (Currency Options) / OPTFUT / OPTCOM (Commodity Options).

 

Pledge & Re – Pledge mechanism

The latest regulations by the regulator have made it mandatory for members to intimate their clients about PLEDGE & RE-PLEDGE mechanism. The stipulated way a client can get their capital requirement is via collateral pledging. While pledging shares, promoters retain their ownership. However, as the share price keeps fluctuating, the value of the collateral also changes. Pledged values are computed on daily basis by ascertaining the respective risk values from the exchange directly. Mutual Funds / ET-F’s / Stocks & Debt Instruments approved for pledge are only allowed to pledge with the member for capital loaning. A vigil way of surveillance has to be maintained as the value of pledged securities may erode at any point in time due to ongoing market conditions.

 

Surveillance & Mark-to-Market Square-OFF

The Surveillance policy in Zebu is fully automated with the latest robust technology. All the deposits and holds of the client are uploaded in RMS servers & based on margin availability on client accounts positions can be taken & warned if any shortfalls have been observed. As per new peak regulations which are levied from 1st Dec 2020 at regular intervals snaps from Surveillance windows with relevant data are taken.

  • The integrated & Automated RMS SQR-OFF system will liquidate or cover client’s positions in Market price if the live client position reaches 75 % MTM of the total value held.  (Note – Liquidation of positions at 75% MTM level can’t be assured all the time and entirely depends upon price movement in exchange.)
  • Periodic validation of all the held positions will be made, Zebu reserves the right to cover or liquidate any risky or exchange delivery positions at any point of time.
  • All the limits provided via PLEDGE & RE PLEDGE mechanism are liable for daily analysis, the value might change as per daily exchange haircut perspectives.
  • No terminal mapping & profile modifications will be made from the RMS end, for the same one has to request KYC from the registered mail – id or phone number only.
  • In case of any shortfall in carry-forwarded (NRML) positions in any segments, the same will be intimated to concern Branches / Branch Managers / Relationship Managers who are liable for client business communications. [Note – Zebu reserves the right to cover & liquidate any heavy shortfall positions > = 150% in a single day if no responses from concerned parties are received.]
  • All the shortfall-driven NRML positions under surveillance (i.e.) < = 101 – 135 % will be given a Max TAT time up to T+3 days only. Fail in which no fund add-ons are received positions might be covered.
  • BF & CF shortfall positions liquidation will start by 3 pm in equity derivatives & 10 pm in case of commodity derivatives.
  • Business partners are liable for any business-related communication with clients at all points, relevant time to time intimations via terminal flashing will also be made. Failing in non-availability (Absence – Has to be reported to Regional managers) of RM / Branch people RMS will communicate with clients.  [Note – It’s required for terminals to be in LIVE mode for admin flashed messages to reach clients.]
  • Circular trading is strictly prohibited & a penalize – able offense according to Exchange – Broker Risk framework.
  • Delay or failure in the clearance of outstanding or dues to the broker

Surveillance will reduce the positions if the MTM loss incurred on a day is more than 70% of the actual margin requirement. In order to retain the position in such cases is possible only if Funds are transferred from the client’s bank account either through ATOM or Fund Transfer. Once the MTM loss for the open positions reaches as per the exchange rule of the margin available, the positions should be cleared from the branch concerned, failing which the positions taken will be cleared off from the surveillance dept. You should carefully consider whether such trading is suitable for you in light of your financial condition. In case of any market volatility/adverse consequences or loss, you shall be solely responsible for the same, and member shall not be responsible, in any manner whatsoever, for the same and it will not be open for you to take a plea that no adequate disclosure regarding the risks Involved was made or that you were not explained the full risk involved by the concerned stockbroker. The constituent shall be solely responsible for the consequences and no contract can be rescinded on that account.

 

Margin shortfall / Peak Margin & DRS (Debt Recovery System)

 Margin shortfall is very common in live positions; this might be due to many aspects like SPAN changes and volatile market momentum. When trade margins are availed via PLEDGE & REPLEDGE mechanism, it’s the LIABILITY of the client to maintain the buffer cash for the Mark – to – Market (MTM) posted in his / her ledger. Margin shortfall & peak margins will be dealt with in the below-mentioned way. Clients and Business Partners are requested to adhere to the same strictly on LIVE sessions to avoid penalization from the exchange.

The rules are commonly applicable for all segments and across exchanges.

In the newly adhered peak regulations by SEBI, regular PEAK snaps are taken, it’s the entire liability of the client to hold sufficient limits in their accounts else penalty will be applicable in the below-specified variables.

(< Rs 1 lakh) And (< 10% of applicable margin)          0.5%

(= Rs 1 lakh) Or (= 10% of applicable margin)             1.0%

The percentile might go up – to a maximum of 5% as the shortfall days exceed or basis of a number of attempts in the ledger.

  • Charges are applicable for ledger debits (Interest) as prescribed in KYC while account opening.
  • Zebu RMS reserves the right to liquidate any collateral available in client demat to tally the total debt available in the client ledger.
  • Uncertain MTM’s and Out of Pockets will be periodically intimated and will be mailed by the RMS to its respective Br managers accordingly. It’s their entire liability to collect the same.
  • PEAK margins will also be intimated to the respective RM’s and Branch managers, it’s the liability of the branch to collect the EOD margin requirement fail in which PEAK PENALTY is applicable.
  • It’s the liability of the business managers to provide a proper understanding of PEAK MARGINS to clients without fail. Remember the various trade patterns followed by clients might also attract penalties.
  • Shortfalls will be intimated to Business managers through the fastest means of communication available. The same will be intimated TWICE a day.
  • It should be ensured that PAYIN’s are received for the short calls provided within the segment closure or EOD.
  • Zebu RMS reserves the right to cover shortfall positions any time after intimations are provided.

 

Derivatives Expiry & Compulsory Delivery

 It must be acknowledged and accepted that there can be no guarantee of profits or no exception from losses while executing orders for purchase and/or sale of a derivative contract being traded on Stock exchanges. Zebu provides full freedom to clients to enjoy the complete calendar spread in the options segment, provided in which the risk liability of the particular positions is entirely vested with the client only. RMS reserves the right to liquidate any risky positions from time to time. The SPAN which is periodically broadcasted in regular intervals will change from time to time & not be fixed.

Equity Compulsory Delivery

From July 2018 expiry, F&O positions are being settled moved from cash settlement mode to compulsory physical delivery settlement in a phased manner. Starting from October 2019 expiry, all stock F&O contracts will be compulsorily physically settled. If you hold a position in any Stock F&O contract, at expiry, you will be required to give/take delivery of stocks. It’s hereby requested to clients and business partners that the part of Equity Derivatives (Future Stock & Option Stock ) has a procedure of compulsory delivery in the form of stocks in respective Demat accounts of client’s according to the Board Lot Quantity of the stock. The exchange obligation varies according to the positions held by the client.

  • The client’s cash balance has to meet the delivery margin obligations for the positions held on the delivery week. Positions running on margin shortfall will be covered anytime within the delivery week when shortfall arises.
  • Positions in the delivery contracts have to be covered within 3 pm, the last date of the expiry day.
  • Exclusion from contract closure will be allowed only if prior intimation has been provided.
  • One has to also remember liquidation in these contracts might not be available all the time on all days of the week.
  • Business partners are liable for any business-related communication with clients at all points, relevant time to time intimations via terminal flashing will also be made. Failing in non-availability (Absence – Has to be reported to Regional managers) of RM / Branch people RMS will communicate with clients.  [Note – It’s required for terminals to be in LIVE mode for admin flashed messages to reach clients.]
  • The exchange will impose a delivery margin up to a maximum of 50 – 75 – 100 % step by step when the delivery week starts for the said positions. It starts with 10% for the first day and exceeds in further days.
  • Additional taxes / Charges & delivery penalty is applicable.
  • Zebu reserves the right to liquidate uncovered positions within 3 pm of the expiry day without intimation.

MCX / Commodity Tender & Physical Delivery

It must be acknowledged and accepted that there can be no guarantee of profits or no exception from losses while executing orders for purchase and/or sale of a derivative contract being traded on Stock exchanges.

  • Commodity derivatives positions traded in MCX like viz GOLD / GOLDM / GOLDPETAL / GOLD GUINEA / SILVER / SILVERM / SILVER MIC / BASE Metals a are physically deliverable after the obligation of entire contract value is received from the client.
  • Delivery via the regional warehouses present across the country.
  • It’s hereby intimated that also certain commodity options positions are also deliverable, ITM / ATM option positions might devolve into futures & then compulsory delivery is implied.
  • The above said contracts will be blocked immediately as the tender period starts. The tender date falls 5 days before expiry.
  • Fresh positions will be blocked on the 1stday of the tender.
  • Roll over time will be provided for the aforesaid contracts & positions till 10 pm on the first day of the tender.
  • Zebu doesn’t allow taking delivery of certain metal positions.
  • One has to also remember liquidation in these contracts might not be available all the time in all days of the week.
  • Business partners are liable for any business-related communication with clients at all points, relevant time to time intimations via terminal flashing will also be made.
  • Failing in non-availability (Absence – Has to be reported to Regional managers) of RM / Branch people RMS will communicate with clients.  [Note – It’s required for terminals to be in LIVE mode for admin flashed messages to reach clients.]
  • Additional taxes / Charges & delivery penalty is applicable.
  • Zebu reserves the right to liquidate uncovered positions within 10 pm of the expiry day without intimation.

 

Equity Settlement Obligations

Equity stocks traded in India follow a fixed & pre – calendared settlement mechanism across the year. The settlement cycle varies accordingly with the category or the stock type here, Eg: SGB (Sovereign Gold Bonds) which gets settled in T3. T+2 settlements are followed in Indian stock markets. Starting with Buying & Selling of the stock it takes 2 days for the stocks to get settle in case of buying & cash settlement in case of selling also.

  • However, 80 % of the sale proceeds can be used for same-day margining.
  • Early pay-in is a mandate from the exchange end for settlement obligations to get completed.
  • BTST – In Buy today Sell tomorrow concept of trade you are allowed to sell your T1 holdings well before it gets settled in your Demat account.
  • Note – The risk liability of BTST transaction entirely lies with client-only, as stock settlement is always based on availability in exchange only.
  • Before clients making a SHORT – SELLING in BO / CO / MIS products should ensure the availability of units in the client Demat account.

Note – Specific symbols might hit Upper freeze from time to time in which selling will lead to auction charges to penalty & auctioning.

 

Equity Corporate actions

 Corporate actions are one of the major factors that determine the health of the stock we hold. Sometimes corporate actions provide the stockholder a lump sum good deal; some might also affect the share price too. Hence as a shareholder, the client has the liability to keep watching out AGM’s & Corporate actions. In this scenario, the client will be directly intimated via emails regarding the upcoming corporate actions and important dates.

Corporate actions include Stock Split / Reverse Stock Split / Rights Issues / Dividends / Mergers & Acquisitions / Spin off / Buyback / Bonus.