FAQ s (Frequently Asked Questions) Collateral

Transcription

1 FAQ s (Frequently Asked Questions) Collateral 1) What deposits does a member have to keep with the exchange and what exposure the member will get against it? Deposits are given at stages as under as per the applicable category of membership: Applicability of Security Category of Membership Exposure TM TCM ITCM PCM Initial Security Deposit No Yes Yes Yes Yes Additional Security Deposit No Yes Yes Yes Yes Base Minimum Capital Yes Yes Yes Yes No Base Capital Yes No No No Yes Cash Deposit No No Yes Yes No Initial Security Deposit Initial Security Deposit is required to be submitted to the Exchange at the time of obtaining membership. Member can deposit such initial security deposit in the form of Cash (minimum 50%), and the balance either through Bank Guarantee and/or Fixed Deposit receipt from Approved Banks. Additional Security Deposit To increase the exposure limits for trading, Members may remit additional security deposit in the following forms: Cash; Cash Equivalent: [Bank Guarantee (BG), Fixed Deposit Receipt (FDR) from approved banks and Approved Government Securities in demat form with the approved custodian(s)] Approved securities in demat form with the approved custodian(s) of the Exchange. Warehouse receipt(s) of approved commodities issued by designated warehouse / vault in physical form. Base Minimum Capital: Members shall be required to comply with the Base Minimum Capital requirement of the Exchange, Members have to deposit by way of interest free Base Minimum Capital (BMC) of Rs. 10 lacs and Rs. 50 lacs for without Algo trading and with Algo trading respectively. Minimum 25% of the above deposit shall be in the form of cash and balance 75% may be in the form of cash equivalents like Fixed Deposit/ Bank Guarantee. Base Capital: All Trading Members (TM) are required to provide Base Capital of Rs 5 lakhs (in cash) on which full exposure would be provided by the Exchange through its ITCM/PCM. Base Capital is required to be maintained at all times. Cash Deposit: All Institutional Trading cum Clearing Members (ITCMs)/Professional Clearing Members (PCMs) are required to provide cash deposit of Rs 50000/- for each TM affiliated to clear the trade through them. Page 1 of 10

2 2) What is Bank Gateway System (BGS)? Bank Gateway System (BGS) has been introduced in Clearing Banks whereby Clearing Banks can effect online confirmation for member request for increase of cash margin deposit. On confirmation from the banks, exposure limit is enhanced. 3) Which are the approved banks for the purpose of Bank Guarantee / Fixed Deposit? Sr. No. Bank Name 1 Allahabad Bank 2 Andhra Bank 3 Axis Bank Limited 4 Bank of America 5 Bank of Baroda 6 Bank of India 7 Bank of Maharashtra 8 Canara Bank 9 Central Bank of India 10 Citibank N.A. 11 Corporation Bank 12 Credit Agricole 13 DBS Bank Limited 14 DCB Bank Limited 15 Dena Bank 16 Federal Bank Limited 17 HDFC Bank Limited 18 ICICI Bank Limited 19 IDBI Bank Limited 20 IDFC Bank Limited Page 2 of 10

3 21 Indian Bank 22 Indian Overseas Bank 23 IndusInd Bank Limited 24 Jammu & Kashmir Bank Limited 25 Karnataka Bank Limited 26 Karur Vyasa Bank Limited 27 Kotak Mahindra Bank Limited 28 Lakshmi Vilas Bank Limited 29 Oriental Bank of Commerce 30 Punjab and Sind Bank 31 Punjab National Bank 32 RBL Bank Limited 33 South Indian Bank Limited 34 State Bank of India 35 Syndicate Bank 36 Tamilnad Mercantile Bank Limited 37 UCO Bank 38 Union Bank Of India 39 United Bank Of India 40 Vijaya Bank 41 Yes Bank Limited (Clearing Banks are in bold) Page 3 of 10

4 4) Which are the approved Banks under Master Bank Guarantee Agreement for issuance of Bank guarantee? List of approved Banks under Master Bank Guarantee Agreement Sr. No. Bank Name 1 Axis Bank Limited 2 HDFC Bank Limited 3 ICICI Bank Limited 4 IDFC Bank Limited 5 IndusInd Bank Limited 6 Kotak Mahindra Bank Limited 7 RBL Bank Limited 8 Yes Bank Limited 5) How can I increase margin and where to verify its status? The margin can be increased by giving Cash / Bank Guarantee / Fixed deposits / Approved Government Securities in demat form as additional security deposit, approved shares & units of Mutual fund in Demat form with the custodian and the warehouse receipts of approved commodities. (Refer relevant circulars) You may also refer to the relevant portion of the website for ease of reference. Click here to direct to the relevant web page. Enhanced collaterals can be viewed online through exchange web based application. 6) How to release margin / Additional security deposit and where to verify its status? The member can release the additional deposit. The Exchange, subject to clearance of Exchange dues, will consider the request for withdrawal of the additional deposit only. Request for release can be considered only when the member has not utilized such deposit / amount for margin at the time of release. The request has to be sent in the format and mode as specified by the Exchange. Request can either be in the prescribed format or electronically through e-xchange. Refund request would be rejected if margin utilization post refund crosses 89% of the eligible deposit. Reduced collaterals can be viewed online through exchange web based application. 7) In whose name should the FDR/BG be issued? The FDR should be drawn in the name of MCX A/c (Name of Clearing Member) or Multi Commodity Exchange of India Ltd. A/c (Name of Clearing Member). The BG should be in favor of Multi Commodity Exchange of India Limited. 8) What should be the value of stamp paper on which BG is executed? The Bank Guarantee should be executed on a non-judicial stamp paper of Rs.300 or the value prevailing in the State where it is executed, whichever is higher. Page 4 of 10

5 9) What valuation logic is applied to arrive at the value of eligible deposits? Valuation Logic for the Member s Collateral Deposits is as follows: Limit = Cash+BG+FD+Approved GSec + (min(cash+bg+fd+gsec), (WR+Sec)) The net of hair-cut valuation of the approved commodities shall not exceed 30% of the total collateral deposits of the member, out of which non-bullion collateral shall not exceed 15% of the total Collateral deposits of the member. Eligible WR collaterals (Bullion) = eligible collaterals / 70 * 30 Eligible WR collaterals (Non-Bullion) = eligible collaterals / 85 * 15 Collateral Category Permitted Components Remarks/limit Cash Cash Full Limit Cash Equivalent Bank Guarantee Fixed Deposits Approved Government Securities (Demat Form Only) Full Limit Non Cash Collateral Eligible Securities Warehouse Receipts * Governed by the upper cap as at individual security/commodity level overall security/commodity level Also restricted up to sum total of Cash & Eligible cash equivalent. * The net of hair-cut valuation of the approved commodities shall not exceed 30% of the total collateral deposits of the member, out of which non-bullion collateral shall not exceed 15% of the total Collateral deposits of the member. The 30 % cap shall be over and above the commodity and member level upper caps defined. Margin limits are uploaded into the system based on the valuation. Every time an increase / release request of the member is processed, the system re-computes the eligible limits based on the above method. Members can take exposure in the market based on the limits uploaded. 10) What is the minimum period for which a FDR/BG can be drawn? In case of a Fixed Deposit Receipt, Initial Security Deposit - minimum period of 36 (thirty six) months Additional Security Deposit - minimum period of 3 (three) Months Base Minimum Capital: - Minimum period of 12 (twelve) months Page 5 of 10

6 In case of a Bank Guarantee, Initial Security Deposit - minimum period of 12 (twelve) months plus 30 days claim period Additional Security Deposit - minimum period of 3 (three) Months plus 30 days claim period Base Minimum Capital: - Minimum period of 12 (twelve) months plus 30 days claim period 11) To which address should the collateral related documents be sent? Risk Department, Multi Commodity Exchange of India Limited, 3rd Floor Exchange Square, Suren Road, Chakala, Andheri (East), Mumbai ) How can a member pledge Equity Shares as Additional Security Deposit? a. Members are required to open a separate demat account with the Exchange approved custodian(s) for depositing securities. b. For this purpose, Members, who are individuals, may open an account in their name if securities offered are held in their names. Members who are a partnership firm may open an account in their partners' names if shares are held in the names of the partners as the case may be, and Members who are corporate body may open an account in the corporate name or in the name of their designated directors as the case may be depending upon the beneficiary of shares. However, these accounts are required to be separate and used for the purpose of such deposit of securities only. 13) Which are the approved custodians for pledge of equity shares? a. HDFC Bank Limited Lodha - I Think Techno Campus, Alpha Building, 8th Floor, Next to Kanjur Marg Railway Station (East), Kanjurmarg (E) Mumbai Contact Details : Ms. Aparna Shisatkar aparna.shisatkar@hdfcbank.com ; Custody.Margin@hdfcbank.com b. Stock Holding Corporation of India Limited (SHCIL) SHCIL house, Plot No P/51 TTC Industrial Area, MIDC Mahape, Navi Mumbai Contact Details: Mr. Ganesh Zodge pledgertl@stockholding.com; ganeshz@stockhoding.com 14) Which are the equity shares that can be pledged? Members can deposit approved securities, as notified by the Exchange from time to time through its circulars, in demat form with the approved custodian(s) of the Exchange towards additional deposit. Click here to view the List of Approved Equity Shares Page 6 of 10

7 15) What is the maximum value of equity shares / units of mutual funds that can be pledged to the exchange towards additional margin? Equity shares and Units of Mutual Funds will be accepted from a member with the following upper limits or such amount as may be decided from time to time: Shares of single ISIN (Group 1) - upper limit of [Rs. 500 lakh] Shares of single ISIN (Group 2) - upper limit of [Rs. 500 lakh] Shares of single ISIN (Group 3) - upper limit of [Rs. 200 lakh] Units of Mutual Fund Schemes (Group 4) upper limit of [Rs. 500 lakh] Total of Shares and Mutual Funds of all the ISINs (collectively) - upper limit of [Rs lakh] 16) Which securities are not accepted / eligible for pledge? The following securities shall not be accepted for the purpose of security deposit: Securities not as per the approved list; Partly paid up securities; Securities subject to any lock in period, buy back scheme, any charge or lien, encumbrance of any kind or whose title is questioned before a Court or any regulatory body or such other limitations. Securities not in the name of Clearing Member. 17) What is the procedure of valuation adopted by the Exchange for pledged securities? The securities shall be subject to hair cut as applied by stock Exchange from time to time. The custodian does the valuation of the shares pledged after applying the hair cut specified. The limit is given on the value so arrived after haircut subject to the Upper limit for each security and the collateral valuation criteria. Exchange accepts the valuation file from the Custodian thrice during the day, the time intervals for which have been fixed as under. File No. File Run by the Custodian Timelines for grant of limit 1 8:30 a.m. Before 10:00 a.m. (before commencement of market) 2 1:30 p.m. After 2:00 p.m. 3 5:00 p.m. After 5:30 p.m. 18) What in case the security pledged is discontinued from the Approved list of securities by the Exchange? In case of discontinuation of a security from the list of approved securities, the same shall not be considered for the purpose of collateral valuation and the benefit granted against the same shall be withdrawn. Members may request for the release of such securities. 19) How can a member pledge commodities/warehouse Receipts (WR) as Additional Security Deposit and where to verify its status? Members can deposit warehouse receipt (WR) of approved commodities in physical form, through the designated warehouses/vaults approved/appointed by the Exchange in this regard. These WR(s) shall be pledged in favor of Multi Commodity Exchange of India Limited (the Exchange). Page 7 of 10

8 Enhanced collaterals can be viewed online through exchange web based application. 20) What are the approved commodities that can be pledged? and what is the eligible maximum limit of pledge for each commodity? Sr. No. Category Commodity Haircut % 1 Agri Commodities 2 Bullions Gold Upper Cap per Member (Net of Hair-Cut) Cardamom 50% Rs. 50 Lacs Cotton 50% Rs. 200 Lacs Mentha Oil 50% Rs. 200 Lacs TCM Members 20% Rs Lacs ITCM/PCM Members 20% Rs Lacs Gold Guinea 20% Rs Lacs Silver a) Upto Rs.15 Crores b) In excess of Rs.15 Crores, upto 35 Crores c) In excess of Rs.35 Crores, upto 50 Crores Total of Commodities for TCM Members Total of Commodities for ITCM/PCM Members 20% 25% 35% Rs Lacs Rs Lacs Rs Lacs Rs Lacs Note: The upper cap of the valuation of warehouse receipts for all the commodities put together will be Rs Crores/ Crores subject to individual commodity wise upper caps. The net of hair-cut valuation of the approved commodities shall not exceed 30% of the total collateral deposits of the member, out of which non-bullion collateral shall not exceed 15% of the total Collateral deposits of the member. The 30 % cap shall be over and above the commodity and member level upper caps defined. Commodities shall be valued at the closing price / settlement price of the previous day for the near month contract of the commodity. Once the near month contract enters the tender period, immediate next month contract shall be considered for valuation. 21) What are the Warehouse Receipts that are not eligible/not acceptable for pledge as Additional Security Deposit? The following warehouse receipts shall not be accepted for the purpose of security deposit: WR(s) where the lien is not marked / discharged in the favor of the Exchange; WR(s) of the commodities that are not in the list of approved commodities; WR(s) of the commodities whose quality certificate is not from the Exchange approved quality assayer; WR(s) of the commodities whose quality certificate is not valid or has expired or if the expiry date is within 5 days from the date of deposit ; Page 8 of 10

9 WR(s) that are not of the designated warehouse/vault; WR(s) subject to any charge or lien, encumbrance of any kind or whose title is questioned before a Court or any regulatory body or such other limitations. 22) How to create a pledge on Warehouse receipts to submit them to the exchange for the Additional Security deposit? Members along with joint holders, if any, may deposit the WR(s) of the approved commodities with the Exchange by marking a pledge in favour of the Exchange. Following documents are required to be provided to the Exchange: Warehouse Receipt (WR) of approved commodity duly pledged along with valid quality certificate. Deed of pledge is to be executed in the format prescribed by the Exchange on a non-judicial stamp paper of Rs.300/- or of such prescribed amount as may be applicable in the State of execution, whichever is higher. Certified true copy of the relevant Board Resolution in case of a corporate body. Members and the joint holders, if any, shall give the necessary pledge instruction(s) to the Warehouse / vault for the WR(s) to be pledged in favour of the Exchange. Once duly pledged WR(s) are accepted, the Exchange will do the valuation of the WR(s) after adjusting the relevant margin percentages / haircut as stipulated by the Exchange and the same shall be considered as additional margin deposit. Refer to circular MCX/C&S/328/2016 for the format of application for pledge of Warehouse Receipts. 23) What is the process of release of Warehouse receipts pledged by the member in favor of the Exchange and how to verify its status? Members may withdraw or replace the pledged WR(s) from time to time. Members are advised to submit a letter for withdrawal of the pledged WR(s) as per the format specified by the Exchange from time to time. The Exchange may consider the request for release provided such member has no outstanding obligations / positions / dues towards the Exchange if any, and that there is no other liability under the Rules, Bye-Laws and Business Rules of the Exchange, and Exchange is of the opinion that such release does not entail any risk. Upon receipt of a request from a Member for withdrawal of WR(s), the Exchange may process such request and issue a letter to the warehouse / vault to cancel the pledge marked in favour of the Exchange and release such WR(s) to the said Member. Reduced collaterals can be viewed online through exchange web based application. 24) What are the indications given to members for renewal of their collaterals? Members are intimated about the details of collaterals, due for renewal, vide an alert in their obligation report 15 days prior to maturity of the Bank Guarantee/FDR/WR/GSec on a daily basis till the date of expiration. 25) When are members suspended for requirements in Collateral deposits? If the collateral submitted for Initial Security deposit expires and no new/renewed collateral is placed to fulfill the requirement of minimum Initial Security deposit to be maintained the member is Page 9 of 10

10 suspended on the next trading day. If the collateral submitted for Base Minimum Capital expires and there is no excess additional collateral deposit available with the Exchange to adjust the deficit, then the member is suspended on the next trading day. In case of margin utilization exceeding the eligible collateral deposits by 90%, member is automatically put under square off mode on an online basis till the utilization is regularized to 85%. Members in square off mode can furnish additional deposits or reduce the exposure towards regularization. Member is required to make good the EOD margin over-utilisation on a T+1 basis, failing which con-compliance charges, as applicable, would be applicable. 26) Which are the Government Securities that can be pledged? Members can deposit approved Government securities, as notified by the Exchange from time to time through its circulars, in demat form with the approved custodian(s) of the Exchange towards additional deposit. 27) What are the end of day reports given to members for information on collaterals? Member can view their collaterals online through e-xchange Exchange provides the following reports to members at the end of the trading day on Extranet (SFTP) SFTP Member Specific Folder Files to Clearing Member Collateral File Expiring Collaterals Collateral Details BMC Collateral Detail File Naming Convention MCX_CD_<CM ID>_<YYYYMMDD>.csv MCX_ExpiringCollateral_<Member ID>_<yyyymmdd>.csv MCX_COLC_CMID_YYYYMMDD.pdf MCX_COLCBA_CMID_YYYYMMDD.pdf Page 10 of 10