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RISK MANAGEMENT POLICY

Name of the Document Risk Management Policy
Policy Owner Mr. Akshay Narkar Compliance Officer
Policy Administrator Respective departments as mentioned in the Policy
Policy Adherence by Respective departments as mentioned in the Policy
Version 01
Issuing Authority Board of Directors
Effective date of document 5th September, 2022
Release Date 6th September, 2022
Date of last review
Next review date On any Regulatory change or annually, whichever is earlier
Date of circulation to relevant stakeholder after approval 6th September, 2022
Version History Initial Version dated 5th September, 2022

This document is the sole property of Bondbazaar Securities Private Limited (“BBSPL”). Any use or duplication of this document without express permission of BBSPL is strictly forbidden and illegal.

  1. Title

    Risk Management Policy (“Policy”)

  2. Objective:

    BBSPL proposes to carry out transactions for its clients and also carries out proprietary transactions. Transactions will be executed for clients as well as CP. All clients pay the requisite margin and EPI of securities or funds may be provided by clients. BBSPL prefers to have a prudent risk management approach and believes in calibrated and conscious risk exposure dedicated by group risk philosophy. The current regulatory framework of SEBI and Exchanges is comprehensive and BBSPL shall ensure full compliance with the framework as applicable from time to time.

  3. Regulatory Background
    Date Source Circular No. Subject
    13-Dec-12 SEBI CIR/MRD/DP/34/2012 Pre-Trade Risk Controls
    26-Sep-16 SEBI SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 Enhanced Supervision of Stock Brokers and Depository Participants
    13-Apr-17 NSE NSE/MSD/34638 Consolidated Circular on matters relating to User Id request
    20-Jun-19 SEBI CIR/HO/MIRSD/DOP/ CIR/P/2019/75 Handling of Clients’ Securities by Trading Members/Clearing Members
    10-Feb-20 NSE NSE/INSP/43486 Reporting of Client Level Cash & Cash Equivalent Balances and Bank Account Balances
    23-Mar-20 NSE NSE/INSP/44478 Reporting of Client Level Cash & Cash Equivalent Balances and Bank Account Balances
    27-May-20 NSE NSE/INSP/44478 Reporting of Client Level Cash & Cash Equivalent Balances and Bank Account Balances
    20-Jul-20 SEBI SEBI/HO/MRD2/DCAP/ CIR/P/2020/127 Framework to Enable Verification of Upfront Collection of Margins from Clients in Cash and Derivatives segments
    20-Jul-21 SEBI SEBI/HO/MRD2_DCAP/ CIR/2021/0598 Segregation and Monitoring of Collateral at Client Level
    20-Aug-21 NSE NCL/CMPL/49348 Segregation and Monitoring of Collateral at Client Level - Reporting Format
    21-Aug-21 NSE NSE/INSP/49369 Pre-Trade risk controls
    17-Sep-21 NSE NCL/CMPL/49640 Segregation and Monitoring of Collateral at Client Level - Reporting Format
    22-Sep-21 NSE NSE/INSP/49691 Segregation and Monitoring of Collateral at Client Level
    03-Jan-22 NSE NCL/CMPT/50876 Consolidated Circular - Capital Market Segment of NCL/td>
  4. Applicability

    This Policy is applicable to trading applications of Bondbazaar Securities Private Limited. (herein after known as “BBSPL”).

  5. Implementation / Process
    5.1 Risk Management Qua the Client:
    1. Client level deposits

      BBSPL proposes to accept deposits from clients in the form of Cash, Fixed Deposit Receipts (FDR) and Bank Guarantee (BG) of specified banks, approved securities and any other form of collateral as prescribed from time to time. FDR / BG are accepted only of approved banks as published by Clearing Corporation (NCL/ICCL) from time to time and within specified limits only. Cheque/DD/PO accepted towards margin is accounted on the same day of realisation.

      BBSPL proposes to accept specified securities from clients as collateral in the form of pledge of securities in its favour from the demat account of its clients as perthe extant guidelines. Refer Section “Risk Management Qua Securities and Contracts -Approved Securities”for more details.

      Client may request for release of any of the deposits provided it’s not utilised towards Margin requirement.

    2. Client level limits

      Client level exposure limits are set based on above deposits and valuation of collaterals provided by client. Once the order is executed, clients’ exposure limit is reduced to the 6 extent of applicable margin. In case of CP trades, margin is provided by BBSPL till the trade is confirmed by Clearing Member of CP.

      Margin calculation is as prescribed by SEBI / Clearing Corporation from time to time. Margins may vary during a trading day i.e. beginning of the day, intraday and end of the day as prescribed by Clearing Corporation. Based on re-computation of margin, clients’ available exposure limit will change from time to time.

      In case of trades executed for a Custodial Participant (CP), Clearing member of the CP shall confirm such trades within such time and through such facility as may be provided to clearing members from time to time. All such trades which have been confirmed by clearing members shall form part of the obligations of clearing member and such clearing member shall be responsible for all obligations arising out of such trades including the payment of margins, penalties, any other levies and settlement of obligations. Trades which have not been confirmed by clearing member of the CP shall be considered as trades executed through BBSPL and shall be settled by BBSPL. Prior to the confirmation by Clearing member of CP, the margins will be reduced from the liquid assets of BBSPL deposited with Clearing corporation and post-confirmation the same will be released from BBSPL and will be the obligation of Clearing member of CP.

      BBSPL will set up maximum margin utilization 90% for clients and monitor client utilisation based on same. Appropriate alert messages will be sent to clients at defined 50% before reaching the maximum utilisation 90%. Margin calls through appropriate mode of communication will be made to client to provide more margin in case of margin shortfall i.e. applicable margin exceeds available deposits of client by defined utilisation 90%.

      BBSPL reserves the right to close/liquidate the open positions / sell securities to the extent of ledger debit and /or to the extent of margin obligations if clients does not clear margin shortfall within stipulated time. Selection of position to be liquidated will be as per best possible combination and the decision and rational of BBSPL shall not be questioned.

      The above-mentioned liquidation will be on a best-effort basis and will be solely at discretion of BBSPL. Any delay in square off or failure to do so shall not result in any reduction of liability of the client and the client shall be responsible for all the outcomes of the trades.

    3. Margin Requirements

      Type of Margins applicable to Cash segment are as follows -

      1. MTM (Mark To Market) Losses including Intraday Crystallised Mark To Market Losses (ICMTM)
      2. VaR Margins
      3. Extreme Loss Margins
      4. Delivery Margin
      5. Special / Additional Margin imposed if any

      BBSPL shall have sole and absolute discretion to require client to deposit higher margin or additional margin than that prescribed by Exchanges / SEBI.

      In cases where early pay-in of securities is made prior to the securities pay-in, such positions for which early pay-in (EPI) of securities is made shall be exempt from margins. Similarly, in cases where EPI of funds is made such positions for which EPI of funds is made shall be exempt from margins.

    4. Margin Collection

      VaR Margin/ Initial Margin and Extreme Loss Margins are collected upfront from the clients and released on completion of pay-in of settlement. Clearing Corporation publishes margin rates for all securities / contracts in each segment at defined time intervals which are minimum margins to be collected from the clients.

      For CM segment, Mark to market losses shall be collected in the following manner –

      1. Mark to market loss shall be calculated by marking each transaction in security to the closing price of the security at the end of trading. In case the security has not been traded on a particular day, the latest available closing price at Exchange shall be considered as the closing price. In case the net outstanding position in any security is nil, the difference between the buy and sell values shall be considered for the purpose of calculating the mark to market margin payable.
      2. The mark to market margin (MTM) shall be collected from the client by T+2 day.

      BBSPL shall calculate and levy the Intraday Crystallised Mark to Market Losses (ICMTM) in the following manner:

      1. ICMTM shall be computed for all trades subject to upfront margining which are executed and closed out on the same trading day
      2. ICMTM shall be calculated based on weighted average prices of trades
      3. ICMTM shall be adjusted against the available deposits of client on a real time basis.
      4. Crystallised losses at a security level for a client shall be adjusted against the crystallised profit, if any, from another security to arrive at client level profit or loss. However, there will be no setoff against crystallised profits across two rolling settlements.
      5. All client level losses including losses on proprietary positions if any shall be grossed up to arrive at member level ICMTM.
      6. ICMTM shall be included in the end of day MTM computation.
      7. ICMTM shall not be computed in case of security in TFTS.
      8. ICMTM so blocked/ collected shall be released on completion of pay-in of the settlement or early pay-in.
    5. Collection and Reporting of Margin
      1. Fund shortages

        As per SEBI guidelines, client’s account cannot be funded by broker. Only grace period of 5 working days from settlement day is given to the client to clear the dues. It is client’s obligation to clear the outstanding dues by T+2 day (T indicates Trading day). The client shall ensure that sufficient funds / securities are kept with BBSPL to meet Exchange obligations

        BBSPL reserves the right to close / liquidate the open positions / sell securities to the extent of ledger debit and /or to the extent of margin obligations. Selling will be done in clients account on T+5 day where T day will be pay out day. No further exposure will be given to clients having debit balance beyond 5 days.

        Further, as per SEBI circular on handling of clients’ securities, in case of Debit balance (at consolidated level) in client ledger account, BBSPL reserves its right to transfer securities to Client Unpaid Securities Account (CUSA) from pool account. In case of non-payment, BBSPL reserves the right to sell securities from CUSA.

        Further, BBSPL also reserves the right to transfer unpaid Securities to client account directly from the pool / CUSA account. In case the client is providing collateral in the form of approved securities as margin, a margin pledge shall be initiated by the client in favour of BBSPL through physical or electronic instruction mechanism provided by the Depositories. In case of non-payment of purchased securities or towards margin obligation of client, where the client has given Power of Attorney in favour of BBSPL, the margin pledge shall be initiated by BBSPL on behalf of the client. The margin pledge will be initiated as per the process defined by the Depositories / SEBI / Exchanges. The client will receive a link on registered Email id / Mobile number mapped with depository (NDSL / CDSL) for confirmation of pledge in favour of BBSPL. Client will have to enter an OTP received on Email id and /or Mobile number within the prescribed timeline to confirm pledge in favour of BBSPL.

        BBSPL reserves the right to re-pledge the securities to the Clearing Corporations. In case the client defaults, BBSPL and/or the Clearing Corporations shall be entitled to invoke securities pledged by the client. BBSPL also reserves right to sell the collaterals pledge by 9 the client towards margins and/or paid securities purchased by the client in earlier settlements where the sale proceeds of unpaid securities are inadequate to cover the payin obligations and/where the unpaid securities appear to be comparatively illiquid and cannot be sold at reasonable rates to the extent required.

        Further, in case of funds shortage, DPC will be charged @ 0.05% per day on an outstanding debit balance from the Settlement date of trade till dues are cleared.

      2. Securities Shortages

        Failure of the client to deliver securities shall result in buy-in auction for the shares (except for internal shortages of NSE) by Clearing Corporation as per auction schedule. Currently auction shall be conducted on T+2 day and settled on T+3 day. In case of multiple settlements conducted on the same day, as specified by SEBI, the auction session for the first settlement shall be conducted on the same day and settled on the next day. The auction for the second settlement shall be conducted on the next day along with the shortages/auction of that day. The settlement of the same shall happen on the subsequent day. Auction shall not be conducted where shortages are directly closed-out and where the securities are under corporate actions. The auction amount shall be charged to the short delivering client. Failure to procure shares in auction shall be closed out. Close out shall be at the highest price prevailing across the Exchanges from the day of trading till the auction day or 20% above the settlement price on the auction day, whichever is higher.

        When the auction seller fails to deliver in part or full on auction pay-in day, the deal shall be closed out at the highest price prevailing across the Exchanges from the day on which the trade was originally executed till the day of auction or 20% over the settlement price on the auction day whichever is higher and will be charged to the auction seller unless otherwise specified.

        For above purpose, the settlement price shall be based on the last 30 minutes volume weighted average price across Exchanges and the day of valuation shall be the day as decided by the relevant authority of the Clearing Corporation from time to time.

      3. Internal Securities Shortages

        Please refer to policy on Auction for Internal Shortage of Securities.

      4. Margin Shortages

        BBSPL shall mandatorily collect upfront margin in lieu of VaR and Extreme Loss Margins i.e. higher of 20% or sum of VaR and ELM % from their clients in Cash segment. The clients must ensure that the VaR margins and ELM are paid in advance of trade and other margins are paid as soon as margin calls are made by BBSPL. If the collected margin is 10 adequate to cover the potential losses over time till pay-in, Mark To Market losses (MTM) shall not be collected from the clients. In other cases, MTM shall be collected from clients by T+2 day. If pay-in (both funds and securities) is made by T+2 working days, the other margins would deemed to have been collected. BBSPL is required to report a single consolidated value comprising of minimum margin, additional margins and MTM collected to Exchange / Clearing Corporation within stipulated time in accordance with the procedure and formats specified by the Clearing Corporation from time to time.

        For each segment, Clearing Corporation sends minimum 4 snapshots of client wise margin requirement to TM/CM/Custodians for them to know the intraday margin requirement per client/TM/Custodial Participant. The snapshots are randomly taken in pre-defined time windows. The client wise margin file (MG-12) provided by Clearing Corporation to TMs/CMs/Custodian shall contain the end of day margin requirements of the client/TM/Custodial Participant as well as the peak margin requirement of the client/TM/Custodial Participant, across each of the intra-day snapshots. BBSPL shall have to report the margin collected from each client/Custodial Participant, as at EOD and peak margin collected during the day.

        TMs/CMs/Custodian are exempted from collecting upfront margins in respect of Institutional transactions. Institutional transactions shall mean transactions done on behalf of Institutional investors as specified by Exchange/Clearing Corporation from time to time. Margins levied on Institutional transactions on T+1 day shall be required to be collected and reported by the Custodians who have confirmed such Institutional transactions. In respect of non-institutional custodial transactions, the margin collection and reporting shall be done by BBSPL for the margins applicable on T day and by the Custodians post confirmation for the margins applicable on T+1 day. In respect of custodial transactions not allocated/rejected/not accepted by the custodians, such positions shall be considered as transactions being cleared by BBSPL and the margins shall be provided by the clients to BBSPL

        For each segment, the margins reported shall be compared in the following manner:

        1. EOD margin obligation of the client /custodial participant shall be compared with the respective client/custodial participant margin available with BBSPL at EOD.

          2. AND

        2. Peak margin obligation of the client/trading member/custodial participant, across the snapshots, shall be compared with respective client/custodial participant peak margin available with BBSPL during the day.

        Higher of the shortfall in collection of the margin obligations at (a) and (b) above, shall be considered for levying of penalty by the Exchange. BBSPL shall ensure collection of all initial margins on an upfront basis and other margins before day end to avoid penalties.

        Penalty shall be levied in case of short/ non-reporting by TMs/CMs/Custodian as specified by the Clearing Corporation from time to time.

        1. Passing on penalties to clients

          Penalties levied by Exchange / Clearing Corporation to BBSPL for initial margin shortage will not be passed on to client.

          In case of failure (cheque not cleared or margin requirement not met by the client) on part of the client resulting which penalty is levied by the Clearing Corporation on BBSPL for short reporting of client upfront margins/ margin on consolidated crystallized obligation/MTM losses, BBSPL shall pass on the actual penalty to the client, provided it has evidences to demonstrate the failure on part of the client. Wherever penalty for short reporting of upfront margin/ margin on consolidated crystallized obligation/ MTM losses is being passed on to the client relevant supporting documents for the same shall be provided to the client.

          Further, penalty for wrong reporting of margins by BBSPL to Exchange / Clearing Corporation must be borne by BBSPL and it cannot be passed on to the client.

      5. Client Categorisation

        Client level risk management will be carried out by BBSPL using suitable Risk Management software(s) for real time monitoring. The Risk Team will also formulate a framework for client categorisation as stated below:

        1. Risk parameters for Client Categorisation:
          1. KYC Risk: When a new client comes for registration whose KRA and CKYC is never done, and Bondbazaar completes the client’s KYC.
          2. Income Range: To check if all the orders placed are as per the income range specified by the client.
          3. Non-POA Clients (when client is a seller): Chances for settlement failure are high when the power to transfer the securities for settlement does not lie with Bondbazaar.
          4. Client’s whose Demat is not with Bondbazaar (when client is a seller): Chances for settlement failure are high when the power to transfer the securities for settlement does not lie with Bondbazaar.
          5. Age: Client’s with age 65 and above are not well versed with technology and hence these orders will require manual intervention.
          6. Politically Exposed Persons (PEP): Individuals holding such positions may misuse their power and influence for personal gain or advantage, or for the personal gain or advantage of close family members and close associates.
          7. Non-Resident Individuals (NRI’s): Compliance Risk (Limit on Investment, Taxation Risks, Minimal Diversification, etc.)
          8. Total Trading Turnover: Clients having a good trading history may be categorised as low risk client’s and accordingly margins may be allocated to them.
          9. Defaults: Depending upon the number of defaults a client does, the client will be categorised as high / medium risk client.
          10. Clients having a dubious reputation as per public information available: Such clients if onboarded will be categorised as very high risk clients.
        2. Categories of Risk:
          1. High Risk (D) – 0% Margin must be provided
          2. Medium Risk (C) – 10% Margin may be provided
          3. Low Risk(B) – 30% Margin may be provided
          Sr No. Client Category Category Code Additional Margin to be given subject to applicable haircuts
          1. High Risk HR 0
          2. Medium Risk HR 10
          3. Low Risk LR 30
          4. Any Other AO As may decided from time to time
    5.2 Risk Management Qua Securities:
    1. Approved Securities
      1. Acceptance of approved securities

        BBSPL accepts specified securities from clients as collateral in the form of pledge of securities in its favour from the demat account of its clients as per the extant guidelines. BBSPL may re-pledge them in favour of Clearing Member of Clearing Corporation. It may also pledge its own securities in favour of Clearing Member / Clearing Corporation for meeting working capital requirements of its business. Securities permitted by the Exchange / Clearing Corporation / SEBI from time to time shall be accepted / pledged.

        The Current permitted list is as under –

        1. Equity shares of companies and units of Exchange Traded Funds
        2. Government of India Securities/T-Bills/Sovereign Gold Bonds
        3. Units of Mutual Funds
        4. Corporate Bonds

        BBSPL proposes that the securities forming part of VaR Margin Group 1 in the Capital Market segment will be accepted as approved securities. Further, BBSPL may also accept certain unapproved securities (i.e. other than Group 1) in addition to the approved securities at its own discretion. The valuation of these securities will be in accordance with the norms prescribed by the Clearing Corporation from time to time. The securities will be valued based on the closing price of T-1 day of the security at the Exchange. The value of the securities will be reduced by such haircut as may be prescribed by the Clearing Corporation from time to time to arrive at the collateral value of the security. Only the value net of applicable haircuts will be considered as the value of the securities pledged. Valuation of securities will be done at such periodic intervals as may be specified by the Clearing Corporation from time to time.

        The quantity of security acceptable by Clearing Corporation from a member is restricted in quantity and value terms. The list of approved securities, the acceptable quantity (Market wide limit and member level limit) of the security and applicable hair cut for the respective security will be as per the Circular issued by Clearing Corporation for the respective month. Further the quantum of each security acceptable will be restricted to certain percentage of cash equivalent collateral placed by member, with Clearing Corporation and the same will be specified in list of approved securities. BBSPL shall ensure compliance with the framework and guidelines from time to time.

        Exchange permits only “own” securities towards the membership deposit requirements. Own securities include securities owned by member or any of the directors, as the sole/ first joint holder, provided no depositor of securities should be a minor as on the date of deposit thereof.

        Clearing Corporation permits “own” securities or trading member proprietary securities or client securities towards the margin deposit requirements. Members can re-pledge client/trading member (TM) proprietary securities only through Margin Pledge facility provided by NSDL and CDSL. The margin pledge facility is also applicable for Custodial Participant (CP) clients of members.

        The prudential norms (Market wide limits, member wise limits and value based limits) will be applied on all securities (OWN and Client/TM Proprietary securities) together. Members’ own securities will be granted priority over client and trading member proprietary securities re-pledged by clearing member for value based limits. For Client/TM Proprietary securities re-pledged, the priority will be on first-in-first-out (FIFO) basis, in other words securities pledged/re-pledged earlier will have a higher priority.

      2. Addition of new security in approved list

        Clearing Corporation may revise the list of approved securities and, the haircuts from time to time. New securities added to the list of approved securities will be accepted and provided as deposit from the effective date communicated by Clearing Corporation.

      3. Removal of securities from approved list

        Clearing Corporation may revise the list of approved securities and, the haircuts from time to time. The securities which have been discontinued from the list of approved securities, are required to be replaced on or before the effective date communicated by Clearing Corporation.

      4. Transition in case of removal of security from approved list

        In a case where a permitted security is removed from the approved list by the Clearing Corporation, an intimation thereof shall be given to clients who have pledged these securities as margin along with an instruction to reduce the exposure or replace the deposits in the form of pledge with appropriate amount of additional securities prior to the effective date or payment of funds commensurate to meet the requirement. Further acceptance of securities removed from the approved list shall be stopped from the day the change is effective. Failure to replace the security or bring down exposure shall be dealt with at client level as included in this policy.

        1. Trading in Penny/ Illiquid stocks / contracts

          In Cash Segment, BBSPL proposes to permit trading only in stocks with Market capitalisation above Rs. 500 crores. Any order placement other than these stocks will require pre-trade approval from Approving Authority – Business Head and Risk head / Business & Compliance Head.

          Stocks which appear in the list of illiquid securities issued by the Exchanges every Quarter are considered penny stocks. These stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. BBSPL shall have the absolute discretion to restrict its clients from placing buy or sell orders in Penny / illiquid / Tradeto-Trade / SME stocks. Client must ensure that placing of such orders does not result in creation of artificial bid / offer / volume or misleading or false appearance of trading. Client shall also ensure that their trading in penny stocks does not operate as a device to inflate or depress or cause fluctuations in the price of such stocks.

          Further, BBSPL may at its discretion restrict intraday trading in such illiquid / penny stocks. BBSPL at its sole discretion may restrict order placement in any other scrip which are extremely volatile and / or subject to market manipulations

          Similarly, BBSPL may restrict trading in GSM securities as published by Exchanges from time to time. BBSPL may also require the client to pay additional margin or Additional Surveillance Deposit in cash based on stage in which the GSM security is placed by Exchange.

        2. SMS Based Scrips

          Please refer to Policy on Unsolicited Messages.

    5.3 Risk Management Qua Securities:

    As part of pre-trade risk control, following limits are set which ensures only valid orders are permitted to enter the order book –

    All orders
    1. Order Level Limit - Any order with value exceeding Rs. 10 crores per order is not permitted.
    2. In addition to above order level limits, cumulative value limit on client orders and value limit for individual security for Basket orders will be set by BBSPL.
    3. Limit Orders away from prevailing market prices

      4. Alerts will be generated if any user places limit order at a price which is specified % away from prevailing market price. Such transactions will be scrutinised.

    Dealer Limits

    Limits are allocated to each dealer upto which they can enter orders. Dealers can check their utilised limits on the trading terminal. Rights are given only to appropriate authority to update the allocated limits.

    Dealer Certification

    Each terminal with user id is required to meet certification requirement as specified by SEBI /Exchange from time to time. Applicable requirements for each segment are as follows -

    Segment Applicable norms
    Capital Market Segment Valid NCFM / NISM Series VII certification for Corporate Manager & Branch Manager for each connectivity (Tap IP).
    5.4 Risk Management Qua the Exchange:
    1. Monitoring of Deposits with Exchange and Clearing Corporation

      Members have to place deposits with Exchange / Clearing Corporation as part of Membership deposits and Margin deposits. Exchange / Clearing Corporation accepts deposits from members in the form of Cash, Bank Guarantees, Fixed Deposit Receipts, Approved Securities and any other form of collateral as may be prescribed from time to time.

      BBSPL shall maintain adequate deposits with Exchanges / Clearing Corporation for exposure based on usage and monitors the utilization at all points of time

    2. Recoupment of deposits during the day

      Based on market volatility, additional margin may be required to be deposited with Exchange / Clearing Corporation. This could be as a result of increase in VAR / Initial Margin, reduction in value of securities provided as collateral, etc. BBSPL shall maintain threshold % limit as specified by Clearing Corporation from time to time beyond which if deposits fall, immediate funds will be deposited with Clearing Corporation / Clearing member.

    3. End of day and day begin exposure availability

      End of day margin calculation and MTM loss may require additional margins to be deposited with Clearing Corporation. It is also required to ensure that any change in margin for the begin day is also provided well in time before the market begins.

    4. Triggering Voluntary Close out mode

      Exchange provides an additional risk management facility – the Voluntary Close out facility to enhance the risk management capabilities. This facility enables members to voluntarily define a limit beyond which all the orders would get risk managed. Members desirous of availing the facility shall define a margin utilization limit within set band i.e.

      Upper limit to move into Risk Reduction mode and Lower limit to move out of Risk Reduction mode. The limits can be modified intra-day provided the member is not in the Risk reduction mode. Member are allowed to modify the lower limit in the risk reduction mode.

      When a member moves into risk reduction mode -

      1. All unexecuted orders shall be cancelled
      2. Fresh orders placed by members to reduce open positions shall be accepted.
      3. Fresh orders placed by members that increase open positions shall be checked for sufficiency of margins and orders that do not satisfy sufficiency of margins will be rejected.
      4. Fresh orders can be placed for immediate or cancel (IOC) only.
      5. Members shall not be allowed to place orders with custodial participant code.
      6. Client and Custodial Participant code modification shall not be permitted.
      7. Members will be able to trade in normal mode as and when the utilisation goes below lower limit.

        8. BBSPL shall maintain upper limit % and lower limit % as specified by Exchange. However, BBSPL may specify upper limit % and lower limit % for above movement of risk reduction mode.

    5. Reporting Margin Collection

      BBSPL is required to report to Clearing Corporation upfront margin collection details of clients as Clearing member for CM segment in prescribed format and within prescribed timeline. The cut off day upto which a TMs/CMs/Custodian may report client margin details to the Clearing Corporation is referred to as the sign off date. It shall be 5 working days after the trade date i.e. TMs/CMs/Custodian shall be allowed to upload client margin reporting file up to T+5 working days.

      Return files are provided by Clearing Corporation intimating whether success or failure of reporting. It also provides response as to sufficient margin was collected or it was insufficient. The response files shall be scrutinised to ensure that all reporting is correctly done and successful.

      The margins reported shall be compared in the following manner:

      1. EOD margin obligation of the client/TM/Custodial Participant shall be compared with the respective client/TM/Custodial Participant margin available with the TM/CM at EOD.

        2. AND

      2. Peak margin obligation of the client/TM/Custodial Participant, across the snapshots, shall be compared with respective client/TM/Custodial Participant peak margin available with the TM/CM during the day

      Higher of the shortfall in collection of the margin obligations at (a) and (b) above, shall be considered for levying of penalty.

      All instances of non-reporting of client margins by the TMs/CMs/Custodian shall be treated similar to and as 100% short reporting of client margins and accordingly penalties shall be imposed.

      Penalty shall be levied in case of short/ non-reporting by TMs/CMs/Custodian as specified by the Clearing Corporation from time to time.

    6. Enhanced supervision - Monitoring of Clients’ Funds

      Stock brokers are required to submit the following data as on last trading day of every week to the Stock Exchanges on or before the next trading day:

      1. Aggregate of fund balances available in all Client Bank Accounts, including the Settlement Account, maintained by the stock broker across Stock Exchanges
      2. Aggregate value of collateral deposited with clearing corporations and/or clearing member
      3. Aggregate value of Credit Balances of all clients as obtained from trial balance across Stock Exchanges
      4. Aggregate value of Debit Balances of all clients as obtained from trial balance across Stock Exchanges
      5. Aggregate value of proprietary non-cash collaterals i.e. securities which have been deposited with the clearing corporations and/or clearing member (across Stock Exchanges)
      6. Aggregate value of Non-funded part of the BG across Stock Exchanges
      7. Aggregate value of Proprietary Margin Obligation across Stock Exchanges

      MC - Aggregate value of Margin utilized for positions of Credit Balance Clients across Stock Exchanges

      MF – Aggregate value of Unutilized collateral lying with the clearing corporations and/or clearing member across Stock Exchanges

      BBSPL proposes to carry out following monitoring based on above details reported to Stock Exchanges as per SEBI prescribed formulae –

      1. Funds of credit balance clients used for settlement obligation of debit clients or for own purpose
      2. Funds of clients used for Margin obligation of proprietary trading
      3. Funds of credit balance clients used for Margin obligations of debit balance clients and proprietary trading
    7. Client Cash and Cash Equivalent reporting

      Members have to submit following data for all calendar days of the week except Sunday on or before the next four trading days of subsequent week.

      1. Day-wise upload of Client Level Cash & Cash Equivalent Balances on a weekly basis for all calendar days of that week except Sunday (i.e. Monday to Saturday);
      2. Day-wise upload of bank Balances (as per the bank statement) of all bank accounts on a weekly basis for all the calendar days of that week except Sunday (i.e. Monday to Saturday)

      Members have to submit “Client Level Cash & Cash Equivalent Balances” data on a consolidated basis across all Exchanges. The data shall be prepared & submitted for all the clients irrespective of the Exchange on which the clients are trading and the same shall be reported to all the exchanges.

      Members are not be required to upload data for clients with zero cash and cash equivalent balances and have not traded in last 12 months. The requirement for aforementioned submissions are applicable to all Trading Members, except for those who are carrying out only proprietary trading and/or only trading for Custodian Settle clients. Members carrying out only proprietary trading and/or only trading for Custodian Settle clients will have to give a one-time declaration to Exchange.

    8. Client level segregation of funds and securities

      As per SEBI directions, with a view to provide visibility of client-wise collateral (for each client) at all levels, viz., Trading Member, Clearing Member and Clearing Corporation, a reporting mechanism, covering both cash and non-cash collaterals is specified by the Clearing Corporations. Accordingly, Clearing Members are required to upload detailed break-up of Cash and Non-Cash collaterals in the prescribed format to Clearing Corporation on daily basis. Also, Trading Members are required to provide 20 client level and proprietary details of break-up of Cash and Non-Cash collaterals to their respective Clearing members in order to enable their Clearing Member to submit the same to Clearing Corporation by the due date.

      The details to be submitted in the report shall essentially cover the following information, in order to provide a holistic view of the entire client collateral at various levels up to the level of CC -

      BBSPL is required to submit the information to Clearing Corporation for CM segment on daily basis in the required format.

      TM → CM CM → SE & CC
      Client collateral received by TM Client collateral received by TM
      Client collateral retained by TM Client collateral retained by TM
      Client collateral placed with CM Client collateral placed with CM
      Client collateral retained by CM
      Client collateral placed with CC
  6. Responsibility

    The Head of Risk shall be responsible for the implementation and supervision of this Policy

  7. Violation

    If anyone is found in violation of this Policy, he/she will be liable for appropriate action by appropriate authority.

  8. Policy Review

    This Policy shall be reviewed as and when there are any regulatory changes are introduced or as and when it is found necessary to change the Policy due to business needs. However, the policy shall be reviewed at least annually. The Board of the BBSPL will be approving authority for the Policy.

  9. Deviation to Framework

    Major deviations to the Policy shall be approved by the Board. All other deviations shall be approved by CEO/Designated Director and Compliance officer of BBSPL.

  10. Power to Remove Difficulties

    In order to remove any difficulties in the application or interpretation of this Policy, the Compliance Officer of BBSPL shall have the power to issue clarifications.

  11. Effective date

    This Policy supersedes the earlier policy on this subject matter. This Policy shall be effective from the date of approval by the Board of Directors of the Company.

    12. Date: 5th September, 2022