In Stock Borrowing and Lending (SBL) transactions, margin requirements are crucial for managing risk and ensuring that borrowing members maintain sufficient collateral. CSE Clear imposes margin requirements on all Borrowing Clearing Members engaged in SBL transactions. These margin requirements are categorized into three components:
- Minimum Margin Requirements.
- Additional Margin Requirements.
- Daily Margin Requirements.
Each Borrowing Clearing Member is required to maintain a minimum margin of Rs. 5,000,000 at all times with the CSE Clear. This base margin ensures that members have the necessary collateral to support their borrowing activities.
If the collateral held by a Borrowing Clearing Member is insufficient for a borrowing order, the CSE Clear imposes additional margin requirements. This is calculated based on the following formula:
This additional margin provides an extra layer of protection to cover potential risks associated with SBL transactions.
The daily margin requirement ensures that collateral is adjusted in line with market fluctuations. The CSE Clear marks the collateral to market based on the security’s closing price at the end of each trading day. Any shortfalls due to price changes must be covered by the Borrower’s Clearing Member as additional collateral. The formula for daily margin is:
This daily adjustment ensures the Borrowing Clearing Members maintain adequate coverage throughout the SBL transaction until settlement.