Rupee Derivatives: Risk Management Process
The default handling procedure for the segment will be as under:
A) Settlement Shortage
Any shortage in meeting daily settlement obligation in this segment shall, unless replenished by the Member by 11.00 A.M. on the next day (by 10.30 A.M. if the next day is a working Saturday), be treated as a Default by the Member.
For meeting such shortage, Clearing Corporation shall have the authority to sell the securities placed by the Member as margin deposit. Such sale could be made either through NDS-OM or Over the Counter or sale through private arrangement as decided by Clearing Corporation.
B) Other than Settlement Shortage
a) Portfolio referenced to MIBOR & MIOIS benchmark:
The Clearing Corporation shall on declaration of default transfer the defaulting Member's proprietary positions to one or more non-defaulting Members by way of a sale (including an auction) or through an allocation mechanism.
b) Portfolio referenced to MIFOR & MMFOR benchmark:
A decision may be taken by the Clearing Corporation to close out all outstanding trades of such member with its bilateral counter-parties.