RISK MANAGEMENT POLICY

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Baldwin Maxwell
5 years ago
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RISK MANAGEMENT POLICY LFS BROKING PRIVATE LIMITED (hereinafter referred as The Company) has set up a Risk Management Policy in order to asses and manages risk arising during normal as well as

1 RISK MANAGEMENT POLICY LFS BROKING PRIVATE LIMITED (hereinafter referred as The Company) has set up a Risk Management Policy in order to asses and manages risk arising during normal as well as abnormal business environment. This helps to provide trading exposure appropriately to all Clients and to curtail risk arising out of any abnormal scenario due to volatile nature of stock markets. Applicability of the said policy is for Cash Market Segment, Equity Derivatives Segment, Currency Derivatives Segment and Commodities segment. BASIC RULES No exposure will be provided to client in case of zero balance and against unclear cheque.* Trading exposure to the Client will be based on his/her ledger balance credit + RMS approved stock valuation (Collateral valuation) after prescribed haircut called as a Fund Value. For allotment of trading exposure primarily funds realization in designated client bank account of the company must be received from client s bank account provided at the time of registration with the company will be considered. The client will be blacklisted for trading exposure in cases of following: - Cheques bounce history more than 3 times due to reasons such as insufficient funds or signature mismatch. - Non receipt of outstanding dues on or before due date (T+2 day) specifically in cases of ad-hoc limit request. Any such client will be provided trading exposure strictly based on available ledger credit balance + fund value (after haircut) of collateral and no ad-hoc/on request limit will be given. Removal of blacklisting tag can only be done with the approval of Head from business/ surveillance division subject to improvement in payment behavior of the Client after track analysis done for next 3 months. LIMIT SETTING Trading exposure is based on margin of the client. Said margin is calculated as a) Available ledger balance + b) fund value of the collateral (i.e. Gross value of stocks transferred to LFS Broking collateral account less haircut) + c) Stocks sold on T day in CNC product + d) Short Sell Value = shares sold which are not in clients demat account with LFS Broking or equivalent arrangement. 150% of sell value will be deducted from a+b+c. No further exposure will be allowed against short sell under any circumstance. Haircut is prescribed as per RMS approved list. Haircut prescription file is separately attached for ready reference. For e.g. Client A has a following scenario: - Ledger credit of Rs.1,00,000 - Fund value of collateral = Rs.60,000 after haircut - Stock sold on T day in CNC product = Rs.20,000/-

2 - Short Sell Value = Rs.30,000 => 150% of Rs.30,000 = Rs.45,000 - Trading exposure calculation = Rs.1,00, ,000 +Rs.20,000 45,000 = Rs.1,35,000/- SPAN + Exposure margin will be considered for exposure calculation. For carry forward trades in derivatives segment collateral available (after haircut) will considered only to cash equivalent. EXPOSURE ALLOCATION Intraday - MIS Delivery - NRML Trade Segment (No. of Times) (No. of Times) Cash Market (CM) 10 3 Index & Stock Futures Index & Stock Options BUY Index & Stock Options SELL Notes: a) Multiple times exposure for intraday square-off trade or delivery based trade or carry forward trade is allowed only for RMS approved stocks. b) Apart from RMS approved stocks rest all category stocks will be given one time trading exposure i.e. equivalent to available ledger balance of the Clients. (Product type CNC) STOCK/SECURITIES GROUPING Stock/Security Category A B D E F G IF M MT P R S SS ST T W XC XD XT Z ZP Description Top 200, Listed in derivatives segment Stocks other than category A NCD, Illiquid & Sensitive (Penny Stocks), Illiquid & Sensitive (Penny Stocks), Illiquid & Sensitive (Penny Stocks), Illiquid & Sensitive (Penny Stocks), Illiquid & Sensitive (Penny Stocks), Illiquid & Sensitive (Penny Stocks)

3 MONITORING & SURVELLANCE SYSTEM Real time surveillance system will give three alerts to the RMS team, dealer managing client account and to the client. These system alerts are pre-impact activities designed for emergency preparedness. a. First MTM loss b. Second MTM loss c. Third MTM loss Client will be communicated at all three alert levels as mentioned above. Client must ensure to fulfill MTM obligation through IMPS/RTGS or any other online fund transfer mechanism set by his/her bank linked to his trading account with the company. All the branches are expected to monitor MTM losses for their clients and liquidate positions at branch trigger maximum. In case of non-fulfillment of MTM obligation on or before 75% of MTM loss, Risk Management Team will liquidate the outstanding MTM loss as a primary act in order to manage the risk from possible defaults. RMS team should be monitoring below mentioned risk assessment parameters: a) Real time MTM b) Net open position c) Above mentioned positions based trader wise, branch wise, strategy wise (in case of derivatives options) COLLECTION & DEBTORS AGEING As most of the policies are designed to offer best possible business practices, collection system towards outstanding dues (Funds) is based in T+7 day mechanism (inclusive of Saturday, Sunday or Holidays if any) based on calendar days. In case of cash market segment (CM) it is expected to receive outstanding due from the client within T+2 day however the company is offering additional 5 days facility to the client for clearing outstanding due (ledger debit + Margin). In case of utilization of said facility the company will charge Delay Payment Charges per annum to the client as informed and mentioned in trading tariff while registration of trading account with The company. In case of derivatives market segment (FAO) it is expected to receive outstanding due (MTM) from the client within T+1 day. Cut off time to receive outstanding dues from the client is 12:00 pm on the specified day as mentioned above. After 12:00 pm on the specific day RMS team will block the client trading account for liquidation purpose.

4 Notes No client should be in debit for more than 7 days in cash market segment after adjustment of credit available in derivatives segment. In case of volatility other than normal scenario RMS team has a full right to curtail trading exposures on existing open as well as fresh positions. RMS team should send notification to respective team/business unit regarding liquidation. Such notifications should be send through an on real time basis if possible or after trading hours (post normal market closure). Intraday square off positions in cash market segment as well as equity derivatives market segment should be squared off on or before 3:00 pm from respective branches/business unit/s. Post 3:05 pm RMS team will block the clients trading account and start manual square offs till normal market closure. RMS will be having sole right to square off these positions as per their convenience on the basis of trading account number sequence or on the priority to the sensitive stock from price point of view or large open position. Intraday square off positions in currency derivatives segment should be squared off on or before 4:30 pm by branches/business units. Post 4:30 pm RMS will block the clients trading account and start manual square offs till normal market closure. Exchange specifies Member and Client wise open position limit, all branches/business units must ensure no breach of set limits by the clients. There is a penalty from exchange towards short margin No fresh trades will be allowed in BANNED scrips. In specific scrips intraday trades (MIS product) can be allowed however carry forward/delivery trades are strictly prohibited. RMS division has sole right to allow/disallow trading in such scrips. REPORT S Business team will be provided following reports: Debtors ageing report > daily basis Margin shortfall report > daily basis List of approved securities and applicable haircut > Monthly basis or as and when updated

5 ANNEXURE A How to execute trade in NOW trading software. There are three types of products available for trade. All clients will be allowed to participate in following three products: Cash Market (CM) segment 1) CNC > - To be used for delivery selling (stocks which are in collateral a/c of LFS Broking or in demat a/c of client. This will not block/affect limit of client. - For buying T2T () type or RMS specified stocks. One time limit equivalent 2) NRML > to ledger credit will be given for such trades. - To be used for delivery buying of approved scrips (for all scrips other than T2T category). 3) MIS > Limit will be calculated based on ledger credit + Fund value after haircut on collateral + net value of stock sold on T day in CNC product in cash market (CM) segment. - To be used for intraday square off trades in cash market (CM) segment. Limit will be calculated based on ledger credit + Fund value after haircut on collateral + net value of stock sold on T day in CNC product in cash market (CM) segment. If client wish to sell stock lying in his demat a/c other than LFS Broking a) For this purpose unit head or dealer must call to RMS division and request for ad-hoc limit which will be provided for immediate execution. b) Order must be executed in NRML product. c) Post trade execution NRML product will be blocked for said client. d) Post trade execution unit head/dealer must inform in writing to settlement division about such execution (on T day itself) marking cc to RMS division and business head. e) In such case unit head must be responsible to get executed DIS from the client before payin day and send scan copy of DIS acknowledgment to settlement division marking cc to RMS and business head. Derivatives Market (FAO) segment 2) NRML > To be used for carry forward trades. 3) MIS > To be used for intraday square off trades in derivatives segment. Notes: Limit will be calculated based on ledger credit + Fund value after haircut on collateral + net value of stock sold on T day in CNC product +MTM debit (during live market) in cash market (CM) segment. SPAN + Exposure margin will be considered for exposure calculation.

Risk Management Policy

Risk Management Policy 1. Refusal of orders for Restricted stocks / Contracts : Anandrathi Share and Stock Brokers Limited (ARSSBL) shall have absolute discretion to accept, refuse or partially accept