How is borrowing limit computed?
The eligible securities deposited by a member in Triparty Repo
Collateral towards borrowing limit are subjected to a valuation exercise at the
end of each business day. The valuation is carried out using CCIL’s
mark-to-mark price for such securities. Aggregate value of securities
contributed by a member, net of haircut, rounded downwards to the nearest rupee
is set as permissible borrowing limit for such member.
Any security deposited during the day as collateral towards borrowing
limit is also revalued at last available MTM price of the security and such a
value, net of haircut, is made available as Borrowing Limit. Value of any
security withdrawn during the day is reduced from the available borrowing limit.
Securities in excess of the required collateral
for Tri party Repo obligation/any other margin utilisation can be withdrawn by
a member after giving required notice as per the Regulations applicable for the
segment. Securities credited to the lender’s GILT account, on account of its
lending, with CCIL can be substituted before session closure. Such substitution
is allowed till T+0 trading session closure. In case of term TREPS,
securities credited to the lender’s account would continue till the maturity
unless the borrower wants a substitution.
All outstanding T+1 trades of the day are considered for End of the Day MTM margin computation. End of the day MTM rates for various TREPs are computed as per process described below. MTM loss on Tri party Repo trades is arrived at after allowing full offset between positions in different TREPs. Net loss, if any, is collected as MTM Margin - net MTM gains are ignored. MTM margin applicable on trades is treated as incremental MTM margin payable at EOD debited immediately on assessment of the same at end of the day. In case of a resultant shortfall in margin, Members are required to fund their Triparty Repo Collateral account within stipulated time on the next business day.
Similarly, based on the Market to Market valuation of securities done either at end of day and/ or on intraday basis, in case there is an MTM margin call, Members are required to contribute securities in Triparty Repo Collateral to the extent of MTM margin call.
Failure to do so attracts penalty.
What is Default Fund and how the contribution of the member is computed?
Default Fund in respect of its
Triparty Repo Segment has been set up with a view to meeting losses arising out
of any default by the members of this segment in discharging their obligations.
Default Fund quantum is based on
the highest stress loss observed in the preceding six months and is reviewed at
end of every month, or on such days when stress loss for the day exceeds 95% of
pre-funded default handling resources. A member’s contribution to the default
fund is determined based on 1) Average of (a) outstanding gross trade volume of
the member and (b) Initial margin contributions and 2) Highest of its Stress
Loss, during preceding six months period, with 50:25:25 as weights for these
components, respectively. The minimum contribution for a member is Rs. 10 Lacs.
The securities contributed by the
members towards Default Fund are valued daily at end of the day. If the value
of the securities net of haircuts falls below a threshold level as notified by
Clearing Corporation from time to time, members are required to contribute such
additional sums to the Default Fund as may be necessary