Revised Exposure Margin for Exchange Traded Equity Derivatives

Last updated: 08 July 2010

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Revised Exposure Margin for Exchange Traded Equity Derivatives

CIRCULAR

CIR/DNPD/3/2010 July 7, 2010

To,

The Managing Directors/Executive Directors

of Derivative Segment of NSE and BSE

and their Clearing House/Corporation

Dear Sir/Madam,

Sub: Revised Exposure Margin for Exchange Traded Equity Derivatives

This is in modification of SEBI Circular No. SEBI/DNPD/CIR-41/2008 dated October 15, 2008 which specified that the exposure margin shall be higher of 10% or 1.5 times the standard deviation (of daily logarithmic returns of the stock price) of the notional value of the gross open position in single stock futures and gross short open position in stock options in a particular underlying.

2. Based on the feedback received from market participants, it has now been decided that the said exposure margin shall be higher of 5% or 1.5 times the standard deviation (of daily logarithmic returns of the stock price).

3. This Circular is being issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

4. This circular shall come into force from July 15, 2010.

5. This circular issues with the approval of the competent authority.

6. This Circular is available on SEBI website at www.sebi.gov.in., under the category “Derivatives- Circulars”.

Yours faithfully,

Sujit Prasad

General Manager

Derivatives and New Products Department

022-26449460

sujitp@sebi.gov.in