Monitoring marketplace building, says SEBI


The Securities and Exchange Board of India (SEBI) said that it is closely monitoring the developments in the Indian stock market and along with the stock exchanges, is prepared to act suitably if required.

Soon after the market side circuit breakers were hit around 9:20 am leading to a trading halt for 45 minutes, the capital markets watchdog said that while the fall in the Indian markets was in line with that in many other global markets, it was monitoring margin and settlement-related situation closely.

“The positions of margin payments, margin utilisation, adequacy of collaterals [securities deposited by the brokers with the clearing corporations] and the pay-ins obligations being met by the clearing members [brokers] are being continuously monitored,” said a statement by SEBI.

“Similarly, the settlement and clearance of trades are also being constantly monitored. SEBI and stock exchanges are prepared to take suitable actions as may be required,” it said, highlighting the fact that there existed a robust risk management framework that would get triggered in response to the market movements.

According to the capital markets regulator, the risk management framework includes Value at Risk (VaR) margin with initial margin to cover 99% risk of a transaction, Extreme Loss Margin (ELM) to cover the residual risk of a transaction, collection of mark to market losses on daily basis, additional surveillance margins based on stress tests, and circuit filters at index and stock levels among other parameters.

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