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Securities and Exchange Board of India CIRCULAR SEBI/HO/MRD2_DCAP/CIR/2021/0598 July 20, 2021 To All Recognized Clearing Corporations All Recognized Stock Exchanges Dear Sir/ Madam Segregation and Monitoring of Collateral at Client Level 1. SEBI, vide circular no. SEBI/HO/MIRSD/DOP/CIR/P/2020/28 dated February 25, 2020, put in place a framework of Margin obligations to be given by way of Pledge/ Re-pledge in the Depository System to mitigate the risk of misappropriation
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FAQ :
The main purpose is to strengthen the protection of client collateral from misuse or misappropriation by Trading Members (TMs) or Clearing Members (CMs), and to mitigate risks associated with TM/CM defaults or the defaults of other clients.
A reporting mechanism will be implemented by Clearing Corporations (CCs) and Stock Exchanges (SEs) to provide client-wise collateral information at the TM, CM, and CC levels. This reporting will be disaggregated by segment and asset type, and will be done on a daily basis. Clients will be able to view this information via a web portal.
The framework covers both cash and non-cash collateral, including securities collateral provided through margin pledge/re-pledge in the Depository system, as well as other forms like Cash, Fixed Deposits (FDs), Bank Guarantees (BGs), or Government Securities provided through the SGL/CSGL route.
In case of a Clearing Member's default, the process involves several stages: completing settlement for non-defaulting CMs, offering portability or immediate return of collateral to non-defaulting clients/TMs/CPs, closing out positions and provisionally appropriating collateral, and finally, identifying defaulting clients and appropriating collateral.
Yes, Clearing Members (CMs) are required to maintain at least 50% of the total collateral in the form of cash or cash equivalents. However, this minimum 50% cash equivalent requirement may not be applied at the individual client level.
Yes, Clearing Corporations (CCs) and Stock Exchanges (SEs) will provide a web portal facility allowing clients to view the disaggregated collateral reporting by their Trading Member (TM) or Clearing Member (CM).
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Source : https://www.sebi.gov.in/legal/circulars/jul-2021/segregation-and-monitoring-of-collateral-at-client-level_51265.html