It is for information of sub brokers/ clients/ APs /Employees of LSE Securities
Limited that various Circulars have been issued by the Company from time to time
on Risk Management Policies. A master policy on risk management is reproduced as
below for the smooth functioning of the operational activities of the Company:
1) CAPITAL ADEQUACY
Sub brokers are required to maintain separate security deposit
with LSE Securities Limited for each Exchange/ segment, quantum and composition
which will be prescribed by the Board of Directors from time to time. This separate
security deposit is non refundable but transferable and is to be maintained in cash
2) ADDITIONAL DEPOSIT
In Cash segment, a sub broker will have to give an additional
deposit in form of Cash and FDRs only and trading limit shall be allowed on the
basis of this additional deposit only. The sub brokers are required to deposit this
additional amount separately for different principal exchanges.
3) TOTAL TRADING EXPOSURE
In Cash Segments exposure limits of branches and users will
be set by the Company from time to time on the basis of deposits available and sub
brokers set the exposure limits of their clients in the Trading Software.
In F&O and Currency Segments, exposure available to Clients will be based on applicable
Upfront Margins and deposits available with LSE Securities Limited.
Trading and exposure limits as above said shall be with in the limit prescribed
by the Stock Exchanges from time to time.
4) GROSS EXPOSURE TRADING LIMITS
LSE Securities Limited shall allow its sub brokers a gross
exposure trading limit up to such times of Security Deposit and Additional Security
Deposit as may be decided by the Board of Directors / risk Management Committee
from time to time. Presently trading limit is 7 times in NEAT.XS and 4 times in
BOLT of the credit balance available in the account of the respective client/ sub
broker and additional deposit, if any given by the client/ sub broker. The Board
of Directors/ Committee or CEO along with Directors authorized for this purpose
may reduce / increase the trading limits as a Risk Management measure.
In case of increase in trading limits sought during the market hours, either the
sub broker or their clients shall transfer funds to the accounts of LSE Securities
on line and requests for such increase, in writing either through logic, e-mail,
fax or letter.
Additional capital deposited by the sub broker / client will be refunded only on
request from the respective sub broker/ client. Presently the Company can release
up to Rs. 2 lacs on the same day and beyond two lacs on the next day of the request.
On reaching 100% of the permissible limits, the trading terminal of the concerned
sub brokers shall be automatically be put in the square off mode. Only on the additional
Security Deposit in the form and proportion prescribed by LSE Securities Limited,
the concerned sub broker will be allowed to trade.
5) MARGIN OBLIGATIONS
A) CASH SEGMENT
The sub brokers are required to pay margins as per the rules
and regulations of respective Principal Stock Exchanges. The obligations of margins,
after adjusting effect of Early Pay-In, if any, will be computed on the basis gross
positions at sub broker level but net positions at client level i.e. gross of all
net positions of all clients. The VAR Margin, MTM and Extreme Loss Margins as applicable
are to be collected from the sub brokers on T+1 day and within prescribed time.
Action will be taken against erring sub brokers who defaults in payment of margins.
The sub brokers can deposit cash, FDRs, other cash equivalent against these margins
B) F&O AND CURRENCY SEGMENTS
The Authorized person and clients will have to pay initial
exposure margins, span margins and any other margin as specified by the relevant
authority from time to time on real time basis. If at any point of time applicable
margins in account of any applicant reaches 100% of limit allowed in F&O/ Currency
Derivative segments, system will not accepts fresh orders from that user and terminal
will be in squaring off mode. Under these circumstances AP/Client will have to square
off his positions or deposit additional margins. Margins in F&O / Currency Segments
can be deposited in the shape of cash, FDR and approved securities and that deposit
is to be made in prescribed ratio of cash and non cash components. At present it
is 40:60 for sub brokers, i.e. 40% cash and 60% non cash component and 75:25 for
clients in F&O segment i.e. 75% cash and 25% non cash component, it is 50:50 for
sub brokers and 75:25 for clients in Currency Derivatives. Here FDR will be considered
as Cash equivalent for calculating the above said ratio.
6) CONTROL OVER MTM IN F&O
The Company will keep Real time check on unrealized MTM Loss
in F & O segment and if unrealized MTM Loss of any AP/Client at any point of time
reaches at 60% of total margins available in account of that AP/Client then terminal
of that client/ AP will be put to square off mode and 50% of loss is to be deposited
immediately else positions will have to be squared off.
7) PAY-IN OF FUNDS & SECURITIES
The pay-in obligations of funds are to be met on T+2day in
Cash Segment and T+1 day in F&O and Currency Derivative Segments and that also with
in the time specified by the Company. So sub brokers/ APs/ Clients having pay-in
obligations are required to maintain balance against their pay-in obligations with
in prescribed time failing of which their terminals are put to squaring mode followed
by suspension of trading till the time pay-in obligations are met out. Positions
can also be squared off depending upon the circumstances.
Similarly for Pay-in obligations of securities clients shall be required to meet
their obligations on T+2 day latest by 10:30 a.m. and in case of short fall, their
obligations will be procured through auctions and difference charged by respective
Principal Stock Exchanges will be debited to respective client account.
8) FOR INTERNAL NETTING OF TRADE
If shortages arise out of Internal netting of trades then
local auction will be done and in case shares are not bought in auction then, internal
closing will be done at highest price of the share from trading day till auction
day or closing price of the share on the Auction day plus 10% which ever is higher
in case of shortage of obligations
9) ACTIONS FOR DEFAULT IN PAY-IN AND MARGIN OBLIGATIONS
1. The payment of Margins must be completed by 10:30 a.m.
2. The pay-in obligations must be met out by 11:55 a.m.
3. If there is delay in payment of margins/ pay-in i.e. obligations
are not met within specified time terminals of erring sub-brokers/ clients will
be first put in squaring mode and if continuing delay they will be put to suspension
mode after waiting for reasonable time and suspension will continue till the time
full obligations are met. If there is no chance of recovery of funds then deals
will be squared off as per procedure laid down in above said meetings.
Further, following action will be taken for major/ unreasonable
delays as under:
Instances of delay during a quarter of a calendar year
(in addition to squaring off/ suspension mode )
For 1st Instance
For 2nd Instance
For 3rd Instance
10% reduction in Exposure Limits in relevant segment for a period of one month
For 4th Instance
15% reduction in Exposure Limits in relevant segment for a period of one month
For 5th Instance
20% reduction in Exposure Limits in relevant segment for a period of one month
For more than 5 instances
25% reduction in Exposure Limits in relevant segment for a period of one month and
in addition to Rs.1 lakh special margin in the form of Cash/ FDR/ Scrips (30% hair-cut)
The delay will be considered as major/ unreasonable for above
said action if payment of margin is not received till 12:30 p.m. and pay-in obligations
are not met by 02:00 p.m.
Also if margins/ pay-in are not paid for whole day on the
day of obligation then 5% reduction will be there in Exposure Limit immediately
in relevant segment for one month. For such repetitive instances 5% penalty of outstanding
amount can also be imposed.
10) FOR LOSS TO CLIENTS DUE TO SQUARE OFF/ SUSPENSION
OF TERMINALS OF THE SUB BROKERS
If terminals of any sub brokers are put to square off/ suspension
mode because of the policy of the Company or default at sub brokers’ end and client(s)
of that sub broker suffer any loss, in that case LSE Securities Limited will not
be responsible for such loss or claim. Erring sub broker will be responsible for
the loss/ claim, if any.
11) DEBIT BALANCES IN CLIENTS’ ACCOUNT
The Company will scrutinize the debit balances in clients’
accounts on regular basis. The debit balances amount of clients (more than 30 days)
shall be debited and blocked in pro account of the respective sub brokers. The amount
so collected will be credited to pro-account in back office. The amount debited
will be released on clearance of debit balances only.
The shares of clients lying in the pool account of the Company
will be released to their DP accounts on clearance of debit balance and other dues.
Aging more than 90 days and 180 days will be viewed seriously.
In additional to blocking of funds and shares trading limits of respective sub brokers
will be reduced by 10% on first instances which can go up to 20% or 30% and further
till old balances are not cleared.
For LSE Securities Limited
Rajesh K. Sharma
Chief Executive Officer