The stock broking industry is associated with two type of risk, viz internal
risk and external risk which includes very high risk in terms of volatility of
stock prices, daily collection of payments from clients etc.
In view of above, to avoid suck risks and to survive in this competitive
environment, Company itself maintain Risk Management system follow up regular
basis at the separate client level activities. To protect the capital &
interest of the company for goodself, the risk of the daily business is
ascertained regularly by the separate department named Risk Management
Department. Pursuant to the commitment of our business activity towards
enhancing investor protection and providing greater transparency we have
endeavored to bring out some rules & regulation of the Exchange and in house
to the client and as well as update the system. With a centralized risk
management system and a stringent compliance process, the company has managed to
keep client defaults and disputes at near zero level.
The working activities are furnished below.
Registration of client
The KYC (Know Your Client) form shall be complete in all respect. The form
shall be duly signed and all the documents which are marked as mandatory in the
Form shall be enclosed. Adequate Due diligence of clients shall be done, along
with proper verification of the documents with the original. The name of the
client given in the PAN Card should tally with the name mentioned in KYC. Also
verify the PAN from Income Tax website. The form shall be scrutinized and then
the client shall get registered.
The above process shall be done in the following stages:
Initially the Compliance Executive shall scrutinize KYC Form along with the
necessary documents. If any discrepancy is found it should be return to the
client and only when the form gets completed it shall pass on to the Compliance
Manager for approval.
The Compliance Manager again scrutinized the Form in full aspect and only
after satisfying with the completion of the Form, it shall forwarded to the
Compliance Officer of the Company for his approval.
After getting approval from the Compliance Officer it shall be finally
forwarded to the KYC Committee who after satisfying with the completion of the
Form approves the registration. Then only the client shall get registered.
Also, an internal audit shall be conducted in respect of all the forms, which
has been executed for opening the Client Accounts. Any deficiency observed,
shall be pointed out and it should be rectify with the immediate effect.
INITIAL COLLECTION OF MARGIN
Initial minimum margin shall be taken from all the clients. Accordingly the
exposure limit shall be set. It can be in the form of cheque or by share pledge.
At the time of share pledge, the value of closing price of share of the
previous day shall be considered & effect of margin share capital provided
to client for daily trading after deduction of haircut of 40 %.
Fixed Deposit is also considered for margin deposit & the fixed deposit
account is created through custodian directly in favor of NSCCL A/c CD
Equisearch in Capital market or F&O market segment. If the value of Fixed
Deposit be less than Rs. 200,000/- then FD shall be pledge in favor of the
Client cash margin bank accounts shall be maintained separately in Capital
Market segment & in F&O segment.
The trade of new client shall be executed after cash margin clearance of
cheque by the bank confirmation of share pledge given by the DP department of
Margin registers shall be maintained by the RMS (Risk Management System)
Department (soft & hard copy) for cash margin deposit or share margin
deposit. Bank clearance cheque shall be followed through accounting system and
the effect shall be given to the right client account through proper scrutiny.
Day To Day Operation
After opening of the client account in the back office, the capital limit for
the client in the front office trading terminal server shall be set according to
Before market hour, the Exchange information for free fresh trading capital
shall be checked on a daily basis
Front office Trading
The trading exposure to the clients shall be allowed by five times gross
exposure on cash or share margin deposit. For daily turnover it shall be allowed
upto 33 times (buy + sale) against the margin deposit.
The RMS server, in which the client code is mapped, shall control the daily
exposure of the individual client and if any time set limit cross by the client,
then system shall be block by default.
Any time, when the exposure limit cross by the client then, fresh capital for
trading exposure shall be set according to dealer request and side by side the
scrutiny by the RMS (Risk Management System) Department shall be done on the
fresh collate deposit by the client or current margin stock valuation after
deducting hair cut. This fresh capital shall be treated as additional base
The margin data as span margin & var margin data shall be provided to the
client according to Exchange guide lines.
Client related data such as F&O ban report to be provided to all the
Branches, Sub brokers and clients and particularly F&O ban script suspended
for trading, shall be locked through server.
Exchange side operation - we follow up: The utilization of exposure shall be
followed as per real time basis with the Exchange and according to the
requirement with the custodian the necessary action shall be taken.
The track of gross exposure utilized by the client above 70 % utilization of
the exposure shall be done through RMS server at the time of trading hour
After trading hour, the trading data by the back office system shall be
uploaded and electronic contract notes shall be issued and it shall be send
through mail server.
Client related data as open position, exercise & assign report, etc.
shall be provided to all the clients through mail server.
Debtor & Creditor Management
Pay in & pay out of fund & securities operation shall be done within
the time frame given by the Exchange. Securities shall be transferred to the
respective clients Demat Account only on receipt of payment from them.
Also, in case of sale of shares by the clients, the payment shall be made to
them only when the shares be delivered by them in the Company's demat account.
Pay in fund - debit balance - The cheque can be either collected from
the client or if the client deposited it directly in the bank of the Company,
the effect in the client account shall be done only after verification in the
bank book or bank deposit slip.
The high value trade of both buy & sale side shall be treated cautiously
and therefore early pay in & pay out funds or securities shall be done
accordingly and also the benefit arises shall pass on to the client accordingly.
Any additional margin levied by the Exchange shall be informed to the client
& if any credit balance is available in the client's account, it shall be
utilized for utilization of margin.
If any cheque given by the client gets dishonoured, it shall be taken care of
before the fund pay out day. Also for the time being, client account shall be
locked/freeze to avoid further trades by the said client and accordingly the
client or the dealer shall be informed about the insufficiency of funds.
Pay out of securities shall be done to the system generated procedure &
only after verification of the same, the shares should be released according to
credit position or on receipt of cheque from them.
If any debit balance is lying in the client's ledger the shares shall be kept
in the beneficiary account of the Company. These shares shall be released only
on the receipt of payment by the client.
Auction of share shall be regularly followed and shall reported to the client
and prior intimation to the client for pay in arrangement shall be made and
after failure report client's fund shall be kept separately more then average 20
% and money shall be kept in the settlement account of the Company for Exchange
The analysis of the debit client management shall be done by the system
generated ageing report on weekly basis.
The track record for allocation of fund & share shall be kept separately
as own account & client account.
The cheque shall be collected from client with in T+0 or T+1 day on day
trading loss for trade or MTM loss.
MARGIN COLLECTION & MARGIN REPORTING
Exchange data regarding margin levied by the Exchange for T+1 or T+2 days
& in F&O segment, Span margin levied by the Exchange shall be informed
to the clients via mail and margin reported MG 13 file shall be uploaded to the
Exchange after collection of margin & updated figure according to client
books shall be provided to the Exchange on a regular basis.
Separately from back office side, the information to the client for margin
collection shall be sent with in T+0 or T+1 day end.
Any margin shortfall reported by the client shall be produced to the Exchange
(for MG 13 reporting) and side by side trade exposure shall be reduced by
squaring up trade or by locking the client account and accordingly the
information shall be sent to the client. Any penalty levied by the Exchange
shall pass on to client account on giving prior intimation to the client.