The Securities and Exchange Board of India (SEBI) on April 11, 2022 has issued Notification on Comprehensive Risk Management Framework for Electronic Gold Receipts (EGR) segment. This has come into force on April 11, 2022.
The following risk management framework applicable to the EGR segment on the recognized Stock Exchange/s prescribed are namely: -
• The core of the risk management system is the liquid assets deposited by members with the Clearing Corporation(CC).
• Types of liquid assets, applicable haircuts and concentration limits are namely: -
1. Cash – No limits
2. Bank Guarantees – Limit on Stock Exchange’s exposure to a single bank.
• Mark to Market Losses – The Stock Exchanges shall collect/adjust mark to market losses (MTM) from the member/broker before the start of the trading of the next day.
• VaR Margin – The VaR Margin is a margin intended to cover the highest loss that can be encountered on 99.9% of the days (99.9% Value at Risk). The VaR Margin would be based on 60, subject to minimum initial margin of 9%.
• Settlement of EGR21 – Members shall be required to maintain account with depositories including a pool account.
[Notification No. SEBI/HO/CDMRD/CDMRD_DRM/P/CIR/2022/50]
