Risk management System
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 such 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
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
nitial 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 Company
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 the Company.
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 margin
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 capital.
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 towards.
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
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 account purpose.
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.