Margin Funding

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Margin Funding

The Project Submitted in partial fulfillment of the requirement for the MASTER OF MANAGEMENT STUDIES Of MUMBAI UNIVERSITY By HETAL A. DESAI
ATH ARVA IN STITUTE OF M AN AGEM EN T STUDIES 2 00 4- 0 6 UNDER THE GUIDANCE OF:

VIPUL MALKAN
(RISK MANAGER)

I NPUT FRO M: HO S H I BH ARUCH A AB H IS H E K DI WE DI

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Margin Funding

ACKNOWLEDGEMENT
It gives me great satisfaction on completion of Summer Project entitled MARGIN FUNDING and COMMODITY MARKET. I am deeply indebted to Risk Manager - MR. VIPUL MALKAN (J M MORGAN STANLEY) for sharing his insights on the topics and for being a constant source of inspiration & courage during the entire project work. He was always available, correcting mistakes, intelligently directing me to proper sources of information advising to aim for simplicity, brevity, clarity and accuracy. I am indeed thankful to him for his valuable guidance. I would also like to express my special thanks to the VP - MR. PRAMOD PARMAR (J M MORGAN STANLEY) for appointing me as project trainee and for his help & co-operation during the Project work. I would also like to thank MR. HOSHI BHARUCHA, MR. ABHISHEK DIWEDI and all others from J M MORGAN STANLEY, for sharing their immense experience and extending their support in carrying out this project work. I am greatly acknowledged for their kind help. DESAI HETAL A.
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AIMS – M.M.S – 2004-06.

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INTRODUCTION
Margin trading is a trading in the securities market with borrowed resources – funds or securities. Margin Trading enables trading by paying only a predetermined percentage of the total value of securities purchased. This predetermined percentage of value is the “margin” that has to be paid towards purchase of securities. The balance amount is paid by using borrowed funds. As margin trading is providing a facility to investors to trade in the market with the margin money, it is essentially, a leverage mechanism. It arises in a market where there is insufficient flow of the supply and demand forces due to lack of adequate funds. Margin trading injects liquidity in the market and provides an avenue of investment for risk taking investors and those willing to finance them. Margin trading enables the investors to increase their purchasing power and raises the possibility to reap substantial profits if the market movements are according to one’s expectations. It injects liquidity into the system which in turn adds to the depth of the market and leads to an effortless formation of prices. It mitigates the quantum of failed trades by supporting the buy and sell sides of trades for smooth settlement. A sound margin policy can alter the credit flow in the economy. When the stock prices rise continuously, imposing a high margin requirement would lower the demand for stocks and thus halt the rising trend in prices on the flip side, certain adverse effects of margin trading have also been noticed. J.K.Galbraith had mentioned margin loans as a major cause for the gravity of the market downturn that brought forth the Great Depression. A low margin requirement in stock index futures was cited by Brady Commission as a reason for 1987 crash. Margin loans reduce the credit available for more legitimate uses i.e. it affects the way credit is allocated. The risks accompanying margin trading would be mitigated if a well-drafted and active margin trading policy is instituted. Further there is a need for a uniform and standardized margin requirement across the board. Otherwise each brokerage house would set margins as per its whims and fancies. Competition would force them to impose a set of low margins which would lead to a spate of possible margin calls in the event of a down turn and lead to a possible enhanced volatility in the
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Margin Funding

market. Margin trading is an important form whereby the integration of money and capital markets is achieved. In many countries there are margin requirements that impose specific limits on the amounts that brokers and institutions can lend. Present Status of Margin trading in India Securities Contracts (Regulation) Rules, 1957 did not permit a broker to take up any fund based activity. Hence, there was an apprehension that brokers would not be able to lend funds for margin trading in view of provisions therein. This was examined by SEBI in 1997 and a view was taken that a broker cannot lend funds as a regular business activity or lending of funds cannot be his prime activity. The margin trading issues were reviewed by SEBI in 2003 and based on the recommendation of its advisory committee, the member-brokers have been allowed to provide margin trading facility to their clients, in the cash segment. The Reserve Bank of India (RBI) has instructed the commercial banks to provide loans to individuals against physical securities up to Rs.10 lakh and Rs.20 lakh for securities held in demat form. Further, guidelines issued by RBI, allow Banks to finance margin trading subject to the following conditions 1) Within the overall ceiling of 5 per cent prescribed for exposure to capital market 2) A minimum margin of 40 per cent of the funds lent for margin trading 3) Shares purchased to be in demat mode under pledge to the lending bank 4) Bank’s Boards to prescribe necessary safeguards to ensure that no nexus develops between inter-connected stock broking entities/stock brokers and the bank in respect of margin trading.

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STEPS INITIATED BY SECURITIES AND EXCHANGE BOARD OF INDIA
Liquidity is one of the important characteristics of a financial market. Illiquidity can lead to “liquidity risk” which has been reported to drive away institutional/high net worth investors from the market. Illiquidity / poor liquidity is known to have caused high transaction costs. With a view to providing more liquidity in the Indian equity market, SEBI has initiated steps to introduce margin trading with effect from April 1, 2004. The salient features of margin trading prescribed by SEBI include: a) It is available only with respect to the securities in Group 1 of the stock exchanges, i.e. securities having mean impact cost of less than or equivalent to one per cent and having traded at least for 80 per cent (plus or minus 5 per cent) of the days in the previous 18 months; b) Only corporate brokers with net worth of at least Rs.3 crores are eligible to offer this facility; c) A broker may use his own funds or borrow from the specified institutions; d) A broker may borrow from scheduled commercial banks and/or NBFCs regulated by RBI. A broker shall not be permitted to borrow funds from any other source. e) Total indebtedness of a broker shall not exceed 5 times his net worth; f) A broker is expected to be prudent and should ensure that no concentration takes place in any single client; g) The initial and maintenance margin for the client, shall be a minimum of 50 per cent and 40 per cent respectively, to be paid in cash; and h) The arbitration mechanism of the exchange shall not be available for grievances arising out of this facility. A review of margin trading practices and regulatory developments in other jurisdictions. i) The broker shall maintain separate client wise accounts of the securities purchased on margin trading with depositories and shall enable the client to observe the movement of securities from his account (through Internet).

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j) The broker shall also maintain a separate record of details (including the sources) of funds used for the purpose of margin trading. Circular by SEBI on Margin Trading Facility

SEBI, based on the recommendations of the Secondary Market Advisory Committee (SMAC) chaired by Dr R H Patil, issued a circular on March 19, 2004 specifying the regulatory framework for Margin Trading Facility. The Committee also deliberated on the data (see tables 1.a and 1.b) made available by NSE/BSE regarding the number of members offering the Margin Trading facility and the details of trading of scrips in the normal segment vis-à-vis under the Margin Trading facility.

Table1.a No of brokers (% of brokers) who are providing the Margin Trading Facility

Month

Total

No.

of Members eligible for Members providing % margin trading facility margin facility BSE 11 13 13 16 17 NSE 11 14 16 18 21 BSE 2 2 3 3 3

to

total

members BSE Apr-04 May-04 Jun-04 Jul-04 Aug-04 843 843 843 843 843 NSE 784 787 791 792 793

trading members NSE 2 4 4 4 4 BSE 18.18 15.38 23.08 18.75 17.65 NSE 0.26% 0.51% 0.51% 0.51% 0.50%

Table 1.b

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Outstanding positions and trading volume in scrips in the normal segment vis-à-vis the trading of these scrips under Margin Trading Facility

Gross outstanding Fresh beginning

positions Positions the month

Gross

outstanding Total in the normal

positions at the during the month liquidated during positions at the end Turnover of the month segment Month Amount (Rs. In Amount (Rs. In Amount (Rs. In Amount lakhs) BSE April May June July August 1213.2 825.62 769.07 600.9 442.53 NSE - (*) 2,206.6 2,448.6 2,065.03 1,597.0 lakhs) BSE 30.34 12.07 6.10 9.29 8.43 NSE 4,554.65 3,370.89 1,775.69 2,406.33 1,934.46 lakhs) BSE 70.03 9.71 20.78 64.33 8.35 NSE 2,348.05 3,128.83 2,159.28 2,874.36 1,856.98 lakhs) BSE 1173.58 827.98 754.39 545.86 442.61 NSE 2,206.60 2,448.62 2,065.03 1,597.00 1,674.48 (Rs. In Amount In lakhs) BSE 36.68 38.51 31.64 34.10 30.67 NSE

(Rs.

85.11 92.77 82.34 90.28 74.98

After deliberations, the Committee made the following recommendations: Recommendations of the SMAC
1.

Securities eligible for Margin Trading Facility To expand the availability of eligible securities for margin trading, all the securities which are offered in the Initial Public Offerings (IPOs) and which meet the conditions for inclusion in the derivatives segment of the Stock Exchanges may be made available for Margin Trading Facility also.

2. Form of maintenance of margins

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Fixed deposits with banks and Bank Guarantee may be treated as cash equivalent and may be considered as acceptable form of initial and maintenance margins for the purpose of availing the Margin Trading Facility. 3. No-objection certificate Under the existing guidelines, before providing margin trading facility to a client who has availed of margin trading facility from another broker, the broker is required to obtain a no objection certificate in writing from the other broker. However, there was no time limit specified for this purpose. It has now been decided that the other broker would be obligated to convey his objection, if any, within a period of 21 days, failing which the broker would be free to proceed with providing margin trading facility to the client. 4. Further, the SMAC also felt that given the past history of misuse of carry forward transactions, appropriate care and caution must be exercised in regard to any scheme of margin trading. The SMAC was, therefore, not in favour of recommending any other modification to the margin trading facility.

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MARGIN FUNDING PRODUCT
Product Description: The Margin Funding product under the suite of secondary market products will allow the broking company’s clients to undertake leveraged trading. Under this, clients of the broking company can take positions in Equity Markets by paying margin of about 30% in form of cash and/or securities and seek funding for the balance. Some broking companies will offer broking facility to its clients and NBFC will finance the trades of the clients who want to take leverage positions. Legal Entities to be used:
This product can be offered either by broking entity itself or through a Non Banking Financial Company (NBFC) arm. In view of the following guidelines issued by SEBI/ Exchanges for margin funding by broker: a) b) Minimum margin of 50% to be collected in Cash/ FD/BG form by the Broker Reporting of client funded position on daily basis to exchanges. Most of the broking companies are offering this product through their NBFC arm with lower margin i.e. at 30% margin or lower. Target Client Base: This product is primarily targeted to the High Networth short term & medium term

positional traders. As the systems mature broking companies may offer this product to retail clients. Currently, F&O Segment offers only 118 scrips and 3 indices for trading. Hence, clients can take arbitrage positions (cash-future/options positions) in these scrips. Also this product will help take leveraged positions in the mid-cap liquid scrips to the clients. Process Flow: The Transaction life cycle will work as under: a) Client will sign up the relevant documentation requirement including irrevocable POA with NBFC for both funds and securities. He will also

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fulfill the broking requirements. Various control points for POA would be adhered too. b) c) d) The Pay-in/Pay-out of funds / securities would be handled through above designated account only. Client will pay the requisite margin to NBFC. On T+2, the Broking would first release the securities / funds for purchase /sale transaction and then NBFC will release the funds / securities for settlement of account. e) f) g) NBFC will maintain the books of account including the stock accounting on behalf of the clients. Periodical reconciliation would be carried-out for both funds / securities at each client level. Broker will monitor the over-all exposure for clients & requisite margin coverage. If a client fails to pay margins in time, broker will square up the positions to bring down the margin call. A) Flow for Initial Funding for Purchase of Shares a) Client will pay 30% margin and shall be deposited in to Bank A/c opened under POA. b) c) Based on Margin receipts, Broker will set an exposure limit. Client will purchase Shares through the Broker. d) On T+2 (payout) broker will transfer Securities in DP A/c where NBFC will have POA. e) NBFC will transfer balance fund to Client Bank A/c f) From Bank A/c balance fund will be paid to Broker.

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NBFC 30% Fund 70% Fund

CLIENT

BANK A/C

DP A/C

Pay-Out of Shares (T+2 Day)

10% pay-In of Funds (T Day) 100% pay-In of Funds (T+1 Day) BROKER

Note: Above Flow-chart is prepared assuming the entire margin given by client in cash from. Client may also give margin in non-cash form i.e. securities. B) Flow for Squaring-up of Funded Purchased Position a) b) In case Clients’ want to square up the existing funded purchase position then he will place an order with Broker. Broker will execute the trade after checking for existing open position. c) d) e) On T+2 (pay-out), the Broker will pay 100% Pay-out of funds for sale consideration to Clients a/c On T+2 NBFC will release the shares to Broker for meeting the pay-in obligation. NBFC after deducting Principal and Interest will remit the balance fund to client.

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NBFC

CLIENT

Loan Amt. Interest

+

Balance Amt.

BANK DP A/C A/C

Pay-In of Shares 90%(T+1 Day)

100% Fund (T+2 Day)

10% Shares (T Day)
BROKER

Note: Above Flow-chart is prepared assuming the entire margin given by client in cash from. Client may also give margin in non-cash form i.e. securities. Brokers offering Margin Trading Currently all the significant secondary market players in India are offering this product to their clients. These brokers include: Broker Name Kotak Securities India Bulls Motilal Oswal Securities Anagram Securities SSKI Refco Securities Fortis Securities (a Book Size Rs. 400 crores Rs. 400 crores Rs. 150 crores Rs. 65 crores Rs. 30 crores Already active

through

Citi

Bank

&

commencing through NBFC route Ranbaxy NA NA Shortly commencing

Arm) ILFS Investmart DSP Merrill Lynch Documentation requirement:

Client needs to sign the following documents:
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Margin Funding

Broker Documentation • • • • • • • • • Member – Client Agreement Client Registration Form Risk Disclosure Document Authority letters – Running Account, Family Account Adjustments etc. Funding Agreement including authorisation of square up. Irrevocable Power of Attorney (POA) for operating the Bank. Irrevocable Power of Attorney (POA) for operating the DP. Account Opening form for opening Bank A/c with particular Bank Account opening form for opening DP A/c.

NBFC Related Documentation:

Client shall also supply the relevant supporting document required for opening the corresponding Accounts with Broking Company, Bank, DP desk.

Risk Containment Measure
Following process would be followed in order to contain risk involved in Margin Funding:

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1) Process: • Client will register itself with both i.e. with Broking company for Brokerage A/c and with the NBFC for Loan A/c. • • • Client will place the adequate margins with NBFC. Broking company will approve the eligible limits. Broking company will set the exposure limits in mid-office and monitor the trades of clients. • Client will settle the account with NBFC and in turn NBFC (holding POA), will settle account for client with the broking company.

2) Eligible Clients:
• Initially the product would be offered to HNI category of clients. Later on the product may be offered to Retail Clients. • • Product would be offered to fund the clients’ purchases in Cash Segment. Broking company will approve the margin funding limits to approved clients. Any upward revision in the client limits will be subject to appropriate approvals • Funding shall be offered to eligible clients by collecting margin. In exceptional cases, the product may be offered at different terms considering credit risk of client, security exposure, collateral offered etc. • The Margin Funding team will ensure completion of all documentation including opening of Clients’ DP and Bank account with Power Of Attorney (POA) in favour of NBFC.

3) Cap on total corpus:
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Margin Funding



Broking entity and NBFC will co-ordinate very closely for the individual client limits and overall funding limits. NBFC will also create temporary funding arrangements with banks against securities offered as collateral / security / pledged by clients.

4) Approved Security for Trading:
• Broking Company will notify the list of approved securities wherein Margin Funding facility would be offered to the clients. • These Securities would be determined based on liquidity / market capitalization criteria. • The list of approved scrips will be notified from time to time and also reviewed for its liquidity and other factors. • In case any security categorized under non-approved category in which clients’ are already holding the position then the client will be asked to liquidate the position. • Portfolio Diversification: Client shall diversify portfolio by not taking position in excess of 40% of approved client limit in any specific scrip. Broking firm will monitor the same on end of day basis and will request the client to settle the excess quantity in normal transaction.

5) Approved Collateral:
• Margin would be accepted from client in the form of Cash and/or approved securities given as collateral. • Client will transfer all securities offered as collateral in DP A/c (which would be opened with Broking entity’s DP Desk) for which POA is given to NBFC.

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This approved list basket would be drawn from the NSE approved list of securities. NSE draws this list scientifically based on liquidity, volatility and other factors. Currently, list comprises of 500 (approx.) liquid securities.



Approved list of securities for collateral would be categorized into A, B and C group based on liquidity and other factors.



Haircut: The haircut at rate of 15%, 30% and 45% would be applied on group A, B and C respectively.



In case any security is removed from the approved security list and if NBFC is holding such security as collateral from any client then client will be asked to replace such security within 10 working days and on failure of client to replace it within sufficient time provided then no collateral benefit would be given to client for such security.



MTM of collateral: The securities accepted from clients as collateral would be marked-to-market on end-of-day basis at the closing price of security. The criteria for considering particular scrip as approved security for trading

and approved collateral are as follows: a) The market capitalization should be greater than Rs. 100 crores. b) The Average Traded Value of Shares per day should be greater than Rs. 50 lakhs. c) The Average Traded Quantity of shares per Day should be more than 25000 shares. d) The close price of the scrip should be greater than Rs. 30. e) The scrip should be an Approved Scrip of NSE / BSE for Collateral purpose. f) The scrip is not an Operator driven Scrip.

6) Liquidity Cap: (to mitigate liquidity risk)
To contain the liquidity risk, the following cap would be applicable:
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Client specific Security Cap: Each Client would be allowed to take the position in any security up to 1 time of the total number of securities traded on an average basis in that security. Total Security Cap: NBFC, as a whole, will try to restrict the cumulative position of all clients’ put together in any security upto 5 times of average no. of securities traded. If this limit is breached then no fresh position would be allowed to be taken by any client.

7)

Exposure

and

Limits

setting

in

Risk

Management System:
• Based on the margin deposit and calculation of available exposure after considering the financed amount, the Risk Management System would set-up the limits in the Risk Management system for trade execution. • The dealers shall place orders through the Order Routing system (ORS) and all orders shall be validated at the order level. • Dedicated personnel would be monitoring the open position at client level and will take corrective actions.

8) Initial Margins and Margin Calls
In order to avail this facility, client shall require to maintain the requisite deposits with the NBFC @ rate of 30%. Client shall require to adhere following:

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Account would be activated only after receipt of initial deposits towards margins in cash / securities form.



Clients would be classified under following zones depending upon the margin coverage with the NBFC from time to time:

Zone Green Blue Yellow Red

Margin Coverage Percentage vs. Positions taken 30% and above 20 – 30 % 10 – 20 % Below 10% Appropriate action would be initiated by Broking firm for clients in

the Blue, Yellow and Red Zone.

9) Square Up Measures:
Squaring-up of positions will be initiated in the following scenarios: • • Non-payment of margin calls where available client margin falls below 10%. Cheque bouncing /demat instruction failing leading to available client margins falling below 10% • Security removed from approved list of trading and client doesn’t liquidate the same within 10 days • Security removed from approved list of collateral and client failed to pay margin calls • Client categorized as ineligible due to non-traceable, disputes, possible default by client and any other circumstances leading to raising nonconfidence in client

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• •

Punching error or disputed position Scrip Cap Limit Excession

10)
Sr.No . A 1

Other Risk involved in Margin Trading
Risk Containment Measures

Risk Involved

Market Risk Price Variation in extreme Continuous monitoring mark to market volatile market variation loss on online basis. Relevant alerts would throw up the violations, and appropriate action can be taken based on

2

Liquidity Risk

situations demands. Margin trading will be allowed in approved scrips only and which would be broadly drawn from top-200 traded list. In order to meet volatility of interest rate environment the interest rates are linked to combination of fixed and floating rate. In situations of certain uncontrollable external factors e.g. act of god/ earthquake / war, appropriate corrective steps may have to be taken to liquidate the portfolio and/or additional margin calls will be made on the client.

3

Change in Interest Rate

4

Unexpected External Factors

B 5 6 7

Legal / Regulatory Risk Legal risk Compliance risk Accounting Risk

Proper documentation should be in place duly vetted by a recognized lawyer. It is essential that all the relevant Rules and Regulations are adhered to. Proper Books of Accounts should be

maintained. Bank & DP accounts should be reconciled regularly to reflect the correct data
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Margin Funding

Sr.No .

Risk Involved

Risk Containment Measures

and utilization of client money properly. Operation Risk and Internal Compliance Risk C 8 Operational risk - Is the risk  of errors and or omissions, through as to misjudgment, negligence and misfeasance, and uncertainty, misunderstanding  confusion responsibility and authority.


Comprehensive systems, operations & procedure manuals should be in place and be adhered to, in order to avoid the operating errors. Proper organization structure and staffing should be in place to manage the operational & risk aspects. Trading function should be separated from the settlement, accounting and risk control functions. Timely relevant MIS should be available. Written confirmation / voice recording of all verbal dealings should be adhered to Periodic Internal audits should be carried out of all functions

 





9

Punching Error at the time of All Dealers should trade through the Order Order Entry / Cheque Receipt Routing System which would avoid punching of non-existing client code & will subject to client risk limit validation. With periodical Bank & DP reconciliation, the punching errors in cheque/scrip receipt entry would be controlled. Securities releases in case of Programmed softwares have sufficient checks debit balances to ensure that securities are not delivered to Stock clients in case of debit balances. Access to Arbitration/ Investor Arbitration Mechanism of the Guarantee Fund

10

11

Protection Fund/ Settlement Exchanges would not be available to resolve any disputes. Hence, all such disputed matters
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Margin Funding

Sr.No . D

Risk Involved

Risk Containment Measures would be referred to the Courts. To contain the system risk, following measures should be initiated


Systems risk

System architecture defining levels of security to preserve integrity and confidentiality of data



All application, front, mid & back-office, should be thoroughly tested including stress testing of it for peak volumes to determine reliability & hard-ware support Application scalable. & hardware should be



E

Firm Management Overview

 

Back up should be in place Risk Committee should be framed for overall supervision & responsibility Policies, adhere too. procedures and internal



guidelines should be framed and be Authority levels for Excess limit approval should be set




Procedure for investigation / sign-off on excessions and errors should be in place Ethical standards and codes of conduct should be followed



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Margin Funding

Scenarios that can play out
1) Various Margin scenarios a) Client brings 30% Cash Margin b) Client brings a mix of margin in cash and security (e.g. 10% in Cash and 20% in security) c) Client brings 30% Scrip Margin 2) Various types of transactions a) Part purchases and one go sale b) One go purchases and Part sales c) Open position being maintained 3) Purchase shortage of shares which is being delivered by Broking later
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Margin Funding

4) Purchase shortage of shares which is being closed out by Broking 5) Collateral scrip being sold by the client and against which the client has taken a position 6) Client takes position in excess of available margins and maintains the same for 3 days 7) Shares are sold by client but same could not be delivered and hence shares are auctioned 8) Trading Scrip is removed from approved list of trading scrips and client continues to maintain position in that scrip 9) Trading Scrip is in Non Approved list of trading scrips and client sells the same. 10) Collateral Scrip is removed from approved list of Collaterals and the client continues to maintain position based on such collaterals. 11) Position continue for a client who has been debarred from Margin Trading Facility 12) If client is funded by 2 or more NBFC then appropriation of funds on square up of positions 13) Handling of Corporate Actions a) in Collateral b) in Traded securities c) in Collateral and in Traded securities 14) Handling of merged settlement 15) Intraday non scheduled payment / stock releases due to contingencies 16) Changes in rate of interest from Mid period 17) Trade value revised after trade confirmation in FES due to changes in Broking Back Office (e.g. change in Brokerage rate) 18) Trade rejection/reversal in FES after trade confirmation process / EOD Process 19) Failure of Demat Instruction Slip for transfer/pledge. 20) Cheque being dishonoured / Bank Fund transfer being rejected a) from NBFC to client b) from Client to NBFC 21) Funds are not available with NBFC to fund the position and due to which stock is withheld by Broking 22) Normal stock being transferred by Broking in Client POA Demat account which in turn transferred to be used as collateral.
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Margin Funding

23) Normal stock being transferred by Broking in POA Demat account which is being repaid to the client from POA.

EXAMPLES:
Given below are two examples that deal with Scenario 1& 2 in detail.
Scrip
ALOKTEXT CONCOR D-LINK GRASIM GSFC GSKCONS HEROHONDA ICI IGL ITC KECINTL LUPIN NTPC

Date

Qty Net Rate

Value

Net Open
2,353 188 1,150 156 1,233 642 282 651 2,066 118 948 471 2,260

Close C/F
68.45 863.05 137.65 1,372.25 129.80 335.50 560.20 247.55 102.95 1,372.95 170.50 588.55 93.95

Mkt Value
161,062.85 162,253.40 158,297.50 214,071.00 160,043.40 215,391.00 157,976.40 161,155.05 212,694.70 162,008.10 161,634.00 277,207.05 212,327.00

MTM P&L
(941.20) (82.72) (609.50) (758.16) (665.82) (1,187.70) (1,119.54) (872.34) (309.90) (853.14) (1,649.52) (1,653.21) (1,401.20)

Cost
162,004.05 162,336.12 158,907.00 214,829.16 160,709.22 216,578.70 159,095.94 162,027.39 213,004.60 162,861.24 163,283.52 278,860.26 213,728.20

4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05 4-Mar-05

2353 68.85 162,004.05 B 188 863.49 162,336.12 B 1150 138.18 158,907.00 B 156 1,377.11 214,829.16 B 1233 130.34 160,709.22 B 642 337.35 216,578.70 B 282 564.17 159,095.94 B 651 248.89 162,027.39 B 2066 103.10 213,004.60 B 118 1,380.18 162,861.24 B 948 172.24 163,283.52 B 471 592.06 278,860.26 B 2260 94.57 213,728.20 B

25

Margin Funding
ONGC PREMINSTR SCI THERMAX VIJAYABANK ALOKTEXT CONCOR D-LINK GRASIM GSFC GSKCONS HEROHONDA ICI IGL ITC KECINTL LUPIN NTPC ONGC PREMINSTR SCI THERMAX VIJAYABANK ALOKTEXT CONCOR D-LINK GRASIM GSFC GSKCONS HEROHONDA ICI IGL ITC KECINTL LUPIN NTPC ONGC PREMINSTR SCI THERMAX VIJAYABANK ALOKTEXT P&L Acc CONCOR D-LINK GRASIM GSFC GSKCONS HEROHONDA ICI IGL ITC KECINTL LUPIN NTPC 4-Mar-05 119 4-Mar-05 3038 4-Mar-05 652 4-Mar-05 177 4-Mar-05 4045 898.92 53.87 163.28 601.35 67.50 106,971.48 163,657.06 106,458.56 106,438.95 273,037.50 B B B B B 119 3,038 652 177 4,045 20,549 2,353 188 1,150 192 1,233 642 282 651 2,066 154 948 471 3,372 237 3,038 652 177 4,045 21,851 2,353 188 1,150 192 1,666 642 282 651 2,066 154 948 471 3,372 237 3,038 652 177 4,045 22,284 188 1,150 192 1,666 642 282 651 2,066 154 948 471 3,372 892.45 53.55 162.30 599.15 67.10 67.00 868.05 139.55 1,369.10 127.00 335.85 562.50 245.50 104.70 1,366.10 168.45 596.00 92.20 903.25 53.65 171.00 593.55 70.30 64.35 852.95 131.10 1,370.00 122.40 340.40 563.75 235.85 106.15 1,345.60 176.90 591.80 93.50 911.10 52.75 167.80 586.05 70.45 64.10 842.00 132.90 1,340.35 123.60 355.05 553.65 236.95 105.00 1,335.20 176.05 574.45 91.35 106,201.55 162,684.90 105,819.60 106,049.55 271,419.50 3,168,296.55 157,651.00 163,193.40 160,482.50 262,867.20 156,591.00 215,615.70 158,625.00 159,820.50 216,310.20 210,379.40 159,690.60 280,716.00 310,898.40 214,070.25 162,988.70 111,492.00 105,058.35 284,363.50 3,490,813.70 151,415.55 160,354.60 150,765.00 263,040.00 203,918.40 218,536.80 158,977.50 153,538.35 219,305.90 207,222.40 167,701.20 278,737.80 315,282.00 215,930.70 160,254.50 109,405.60 103,730.85 284,970.25 3,523,087.40 158,296.00 152,835.00 257,347.20 205,917.60 227,942.10 156,129.30 154,254.45 216,930.00 205,620.80 166,895.40 270,565.95 308,032.20 (769.93) (972.16) (638.96) (389.40) (1,618.00) (16,492.40) (3,411.85) 940.00 2,185.00 (549.72) (3,452.40) 224.70 648.60 (1,334.55) 3,615.50 (1,260.06) (1,943.40) 3,508.95 (5,867.64) 604.34 303.80 5,672.40 (991.20) 12,944.00 11,836.47 (6,235.45) (2,838.80) (9,717.50) 172.80 (6,396.56) 2,921.10 352.50 (6,282.15) 2,995.70 (3,157.00) 8,010.60 (1,978.20) 4,383.60 1,860.45 (2,734.20) (2,086.40) (1,327.50) 606.75 (21,450.26) (457.61) (11,046.11) (2,058.60) 2,070.00 (5,692.80) 1,999.20 9,405.30 (2,848.20) 716.10 (2,375.90) (1,601.60) (805.80) (8,171.85) (7,249.80) 106,971.48 163,657.06 106,458.56 106,438.95 273,037.50 3,184,788.95 162,004.05 162,336.12 158,907.00 264,175.08 160,709.22 216,578.70 159,095.94 162,027.39 213,004.60 212,492.60 163,283.52 278,860.26 318,167.24 214,235.84 163,657.06 106,458.56 106,438.95 273,037.50 3,495,469.63 162,004.05 162,336.12 158,907.00 264,175.08 214,433.18 216,578.70 159,095.94 162,027.39 213,004.60 212,492.60 163,283.52 278,860.26 318,167.24 214,235.84 163,657.06 106,458.56 106,438.95 273,037.50 3,549,193.59 162,336.12 158,907.00 264,175.08 214,433.18 216,578.70 159,095.94 162,027.39 213,004.60 212,492.60 163,283.52 278,860.26 318,167.24

7-Mar-05 7-Mar-05 7-Mar-05 7-Mar-05 36 1,370.72 49,345.92 B 7-Mar-05 7-Mar-05 7-Mar-05 7-Mar-05 7-Mar-05 7-Mar-05 36 1,378.65 49,631.36 B 7-Mar-05 7-Mar-05 7-Mar-05 1112 93.92 104,439.04 B 7-Mar-05 118 909.02 107,264.36 B 7-Mar-05 7-Mar-05 7-Mar-05 7-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05 11-Mar-05

433

124.07

53,723.96 B

16-Mar-05 2353 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05

64.16 150,957.94 S

26

Margin Funding
ONGC PREMINSTR SCI THERMAX VIJAYABANK 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 16-Mar-05 237 3,038 652 177 4,045 19,931 188 1,150 609 192 1,666 642 282 651 2,066 154 948 441 471 3,372 237 3,038 652 177 4,045 20,981 909.15 52.30 164.65 582.05 70.25 215,468.55 158,887.40 107,351.80 103,022.85 284,161.25 3,349,657.85 160,758.80 153,525.00 103,925.85 247,747.20 202,169.10 220,751.70 152,026.20 152,171.25 213,107.90 201,917.10 170,924.40 50,604.75 264,490.05 302,468.40 215,907.00 156,001.30 107,221.40 99,518.25 269,801.50 3,445,037.15 (462.15) (1,367.10) (2,053.80) (708.00) (809.00) (22,471.61) 2,462.80 690.00 182.70 (9,600.00) (3,748.50) (7,190.40) (4,103.10) (2,083.20) (3,822.10) (3,703.70) 4,029.00 (1,252.44) (6,075.90) (5,563.80) 438.45 (2,886.10) (130.40) (3,504.60) (14,359.75) (60,221.04) 214,235.84 163,657.06 106,458.56 106,438.95 273,037.50 3,387,189.54 162,336.12 158,907.00 103,743.15 264,175.08 214,433.18 216,578.70 159,095.94 162,027.39 213,004.60 212,492.60 163,283.52 51,857.19 278,860.26 318,167.24 214,235.84 163,657.06 106,458.56 106,438.95 273,037.50 3,542,789.88

ALOKTEXT CONCOR D-LINK ESABINDIA GRASIM GSFC GSKCONS HEROHONDA ICI IGL ITC KECINTL KIRLOSKCU M LUPIN NTPC ONGC PREMINSTR SCI THERMAX VIJAYABANK

18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05 18-Mar-05

609

170.35 103,743.15 B

62.35 855.10 133.50 170.65 1,290.35 121.35 343.85 539.10 233.75 103.15 1,311.15 180.30 114.75 561.55 89.70 911.00 51.35 164.45 562.25 66.70

441

117.59

51,857.19 B

Scenario1: Client brings 30% Cash Margin
Date Type Scrip Name Qty 3/12/2005Cash Rate Scrip Value Net Collateral hair-cut Net Value 1,000,000

Flow of Accounting Entries
Voucher Date VType Ledger A/c 3-Mar-05Bank Recpt Bank Book 3-Mar-05Bank Recpt Capital A/c 4-Mar-05Bill Investment A/c 4-Mar-05Bill FIRM’S Broker A/c 7-Mar-05Bill Investment A/c 7-Mar-05Bill FIRM’S Broker A/c 8-Mar-05Bank Recpt Bank Book 8-Mar-05Bank Recpt NBFC A/c 8-Mar-05Bank Pymt FIRM’S Broker A/c 8-Mar-05Bank Pymt Bank Book 9-Mar-05Bank Recpt Bank Book Particulars To Capital Brought In Capital Brought In To FIRM’S Broker A/c By Investment A/c - Purchase To FIRM’S Broker A/c By Investment A/c - Purchase To NBFC A/c By Bank A/c To Bank A/c By FIRM’S Broker A/c To NBFC A/c Debit 1,000,000.00 3,184,788.95 3,184,788.95 310,680.68 310,680.68 2,184,788.95 2,184,788.95 3,184,788.95 3,184,788.95 310,680.68 27 Credit 1,000,000.00

Margin Funding 9-Mar-05Bank Recpt NBFC A/c 9-Mar-05Bank Pymt FIRM’S Broker A/c 9-Mar-05Bank Pymt Bank Book 11-Mar-05Bill Investment A/c 11-Mar-05Bill FIRM’S Broker A/c 15-Mar-05Bank Recpt Bank Book 15-Mar-05Bank Recpt NBFC A/c 15-Mar-05Bank Pymt FIRM’S Broker A/c 15-Mar-05Bank Pymt Bank Book 16-Mar-05Bill FIRM’S Broker A/c 16-Mar-05Bill Investment A/c Profit & Loss on 16-Mar-05JV Investment A/c 16-Mar-05JV Investment A/c 18-Mar-05Bill Investment A/c 18-Mar-05Bill FIRM’S Broker A/c 18-Mar-05Bank Recpt Bank Book 18-Mar-05Bank Recpt FIRM’S Broker A/c 18-Mar-05Bank Pymt NBFC A/c 18-Mar-05Bank Pymt Bank Book 18-Mar-05JV Interest A/c 18-Mar-05JV NBFC A/c By Bank A/c To Bank A/c By FIRM’S Broker A/c To FIRM’S Broker A/c By Investment A/c - Purchase To NBFC A/c By Bank A/c To Bank A/c By FIRM’S Broker A/c To Investment A/c - Sales By FIRM’S Broker A/c 310,680.68 310,680.68 310,680.68 53,723.96 53,723.96 53,723.96 53,723.96 53,723.96 53,723.96 150,957.94 150,957.94

To Investment Loss 11,046.11 By P&L on Investments 11,046.11 To FIRM’S Broker A/c 155,600.34 By Investment A/c - Purchase 155,600.34 To FIRM’S Broker A/c 150,957.94 By Bank A/c 150,957.94 To Bank A/c 150,957.94 By NBFC A/c 150,957.94 To NBFC A/c 7,452.99 By Interest 7,452.99 TOTAL 11,274,554.03 11,274,554.03

Ledger
Party Ledger for: Voucher Date Vtype 01/03/2005 To 18/03/2005 Particulars Capital Brought In Debit Credit - 1,000,000.00 Balance
(1,000,000.00)

Capital A/c
3-Mar-05Bank Recpt

NBFC A/c
8-Mar-05Bank Recpt 9-Mar-05Bank Recpt 15-Mar-05Bank Recpt 18-Mar-05Bank Pymt 18-Mar-05JV By Bank A/c By Bank A/c By Bank A/c To Bank A/c by Interest A/c 2,184,788.95 310,680.68 53,723.96 150,957.94 7,452.99
(2,184,788.95) (2,495,469.63) (2,549,193.59) (2,398,235.65) (2,405,688.64)

Firm’s Broker A/c
4-Mar-05Bill 7-Mar-05Bill 8-Mar-05Bank Pymt 9-Mar-05Bank Pymt 11-Mar-05Bill 15-Mar-05Bank Pymt 16-Mar-05Bill 18-Mar-05Bill By Investment A/c - Purchase By Investment A/c - Purchase To Bank A/c To Bank A/c By Investment A/c - Purchase To Bank A/c To Investment A/c – Sales By Investment A/c - Purchase 3,184,788.95 310,680.68 3,184,788.95 310,680.68 53,723.96 53,723.96 150,957.94 155,600.34
(3,184,788.95) (3,495,469.63) (310,680.68) (0.00) (53,723.96) (0.00) 150,957.94 (4,642.40)

28

Margin Funding 18-Mar-05Bank Recpt By Bank A/c 150,957.94
(155,600.34)

Investment A/c
4-Mar-05Bill 7-Mar-05Bill 11-Mar-05Bill 16-Mar-05Bill 16-Mar-05JV 18-Mar-05Bill To FIRM’S Broker A/c To FIRM’S Broker A/c To FIRM’S Broker A/c By FIRM’S Broker A/c By P&L on Investments To FIRM’S Broker A/c 3,184,788.95 310,680.68 53,723.96 150,957.94 11,046.11 155,600.34
3,184,788.95 3,495,469.63 3,549,193.59 3,398,235.65 3,387,189.54 3,542,789.88

Bank Book
3-Mar-05Bank Recpt 8-Mar-05Bank Recpt 8-Mar-05Bank Pymt 9-Mar-05Bank Recpt 9-Mar-05Bank Pymt 15-Mar-05Bank Recpt 15-Mar-05Bank Pymt 18-Mar-05Bank Recpt 18-Mar-05Bank Pymt To Capital Brought In To NBFC A/c By FIRM’S Broker A/c To NBFC A/c By FIRM’S Broker A/c To NBFC A/c By FIRM’S Broker A/c To FIRM’S Broker A/c By NBFC A/c 1,000,000.00 2,184,788.95 3,184,788.95 310,680.68 310,680.68 53,723.96 53,723.96 150,957.94 150,957.94
1,000,000.00 3,184,788.95 310,680.68 53,723.96 150,957.94 -

Interest A/c
18-Mar-05JV To NBFC A/c 7,452.99
7,452.99

Profit & Loss on Investment A/c
16-Mar-05JV To Investment Loss 11,046.11
11,046.11

Trial Balance
Debit Capital A/c NBFC A/c Broker A/c Investment A/c Bank Book Interest A/c P&L Credit (1,000,000.00) (2,405,688.64)

(155,600.34) 3,542,789.88 7,452.99 11,046.11 3,405,688.64

(3,405,688.64)

29

Margin Funding Margin Statement Open Market value MTM P&L Total Available Margin Minimum Margin Margin Portfolio of Portfolio at for today after hair-cut & MTM required shortfall/coverage Value at EOD ( after hair-cut) original Cost

Date

In value 1 4-Mar-05 3,184,789 7-Mar-05 3,495,470 11-Mar-05 3,549,194 16-Mar-05 3,387,190 18-Mar-05 3,542,790 21-Mar-05 3,539,964 2 3,168,297 3,490,814 3,523,087 3,349,658 3,445,037 3,444,737 3

In %

In % In value

In %

In value

4=17+18+19 5= 6 7=6*2/100 8=5-6 9=7-4 4/2*100 (16,492) 983,508 31% 30% 950,489 1% 33,019 11,836 (21,450) (22,472) (60,221) 1,586 995,344 973,894 962,468 902,247 904,772 29% 30% 1,047,244 28% 30% 1,056,926 29% 30% 1,004,897 26% 30% 1,033,511 26% 30% 1,033,421 -1% -2% -1% -4% -4% (51,900) (83,032) (42,429) (131,264) (128,649)

Continued…
Additional Position can be taken for Unutilized Margin Cash Funding Margin Coverage Limit ( before hair-cut) Approved Limit Available Utilized Margin in % cash Available Cumulative Margin in MTM less Non-cash realised P/L

In % 10 110,062 -

In value 11 0 0 -

In % In value 12 13 14 31% 983,508 29% 995,344 28% 973,894 29% 962,468 26% 902,247 26% 904,772

15 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000

16

17

18 0 0 0 0 0 0

19 (16,492) (4,656) (26,106) (37,532) (97,753) (95,228)

32% 1,000,000 35% 1,000,000 35% 1,000,000 34% 1,000,000 35% 1,000,000 35% 1,000,000

0 (2,184,789) 0 (2,549,194) 0 (2,398,236) 0 (2,405,689)

Scenario 2: Client brings 30% Scrip Margin
30

Margin Funding Date Type Scrip Net Collateral

31

Margin Funding Scrip Name Qty 4-Mar-05Scrip 4-Mar-05 4-Mar-05 7-Mar-05Scrip 7-Mar-05 7-Mar-05 11-Mar-05Scrip 11-Mar-05 16-Mar-05Scrip 16-Mar-05 18-Mar-05Scrip 18-Mar-05 21-Mar-05Scrip 21-Mar-05 ACC NTPC ONGC ACC NTPC ONGC ACC NTPC ACC NTPC ACC NTPC ACC NTPC 2000 5000 300 2000 5000 300 2000 5000 2000 5000 2000 5000 2000 5000 Rate 374.00 93.95 892.45 369.00 92.20 903.25 367.00 93.50 361.00 91.35 360.00 89.70 361.00 88.15 Value 748,000 469,750 267,735 1,485,485 738,000 461,000 270,975 1,469,975 734,000 467,500 1,201,500 722,000 456,750 1,178,750 720,000 448,500 1,168,500 722,000 440,750 1,162,750 Value hair-cut Net Value 30% 523,600 30% 328,825 30% 187,415 1,039,840 30% 516,600 30% 322,700 30% 189,683 1,028,983 30% 513,800 30% 327,250 841,050 30% 505,400 30% 319,725 825,125 30% 504,000 30% 313,950 817,950 30% 505,400 30% 308,525 813,925

Date 11-Mar-05

Scrip Name Qty ONGC 300

Close c/f 911.1

P&L A/c 5, 273,330 595

Flow of Accounting Entries
Ledger A/c Investment A/c3-Mar-05Bank Recpt collateral 3-Mar-05Bank Recpt Capital A/c 4-Mar-05Bill Investment A/c 4-Mar-05Bill FIRM’S Broker A/c 7-Mar-05Bill Investment A/c 7-Mar-05Bill FIRM’S Broker A/c 8-Mar-05Bank Recpt Bank Book 8-Mar-05Bank Recpt NBFC A/c 8-Mar-05Bank Pymt FIRM’S Broker A/c 8-Mar-05Bank Pymt Bank Book 9-Mar-05Bank Recpt Bank Book 9-Mar-05Bank Recpt NBFC A/c 9-Mar-05Bank Pymt FIRM’S Broker A/c 9-Mar-05Bank Pymt Bank Book 11-Mar-05Bill Investment A/c 11-Mar-05Bill FIRM’S Broker A/c 11-Mar-05Bill FIRM’S Broker A/c Investment A/c11-Mar-05Bill collateral Voucher Date VType Particulars To Capital Brought In By Investment A/c -collateral To FIRM’S Broker A/c By Investment A/c - Purchase To FIRM’S Broker A/c By Investment A/c - Purchase To NBFC A/c By Bank A/c To Bank A/c By FIRM’S Broker A/c To NBFC A/c By Bank A/c To Bank A/c By FIRM’S Broker A/c To FIRM’S Broker A/c By Investment A/c - Purchase To Investment A/c - Sales By FIRM’S Broker A/c Debit 1,485,485.00 1,485,485.00 3,184,788.95 3,184,788.95 310,680.68 310,680.68 3,184,788.95 3,184,788.95 3,184,788.95 3,184,788.95 310,680.68 310,680.68 310,680.68 310,680.68 53,723.96 53,723.96 273,330.00 273,330.00 32 Credit

Margin Funding Investment A/ccollateral Profit & Loss on 11-Mar-05JV Investment A/c 15-Mar-05Bank Recpt Bank Book 15-Mar-05Bank Recpt NBFC A/c 15-Mar-05Bank Pymt FIRM’S Broker A/c 15-Mar-05Bank Pymt Bank Book 15-Mar-05Bank Recpt Bank Book 15-Mar-05Bank Recpt FIRM’S Broker A/c 15-Mar-05Bank Pymt NBFC A/c 15-Mar-05Bank Pymt Bank Book 16-Mar-05Bill FIRM’S Broker A/c 16-Mar-05Bill Investment A/c Profit & Loss on 16-Mar-05JV Investment A/c 16-Mar-05JV Investment A/c 18-Mar-05Bill Investment A/c 18-Mar-05Bill FIRM’S Broker A/c 18-Mar-05Bank Recpt Bank Book 18-Mar-05Bank Recpt FIRM’S Broker A/c 18-Mar-05Bank Pymt NBFC A/c 18-Mar-05Bank Pymt Bank Book 18-Mar-05JV Interest A/c 18-Mar-05JV NBFC A/c 11-Mar-05JV

To P&L on Investments By Investment A/c- collateral To NBFC A/c By Bank A/c To Bank A/c By FIRM’S Broker A/c To FIRM’S Broker A/c By Bank A/c To Bank A/c By NBFC A/c To Investment A/c - Sales By FIRM’S Broker A/c

5,595.00 5,595.00 53,723.96 53,723.96 53,723.96 53,723.96 273,330.00 273,330.00 273,330.00 273,330.00 150,957.94 150,957.94

To Investment Loss 11,046.11 By P&L on Investments 11,046.11 To FIRM’S Broker A/c 155,600.34 By Investment A/c - Purchase 155,600.34 To FIRM’S Broker A/c 150,957.94 By Bank A/c 150,957.94 To Bank A/c 150,957.94 By NBFC A/c 150,957.94 To NBFC A/c 10,167.15 By Interest 10,167.15 TOTAL 13,588,338.19 13,588,338.19

Ledger
Party Ledger for: Voucher Date VType 01/03/2005 To 18/03/2005 Particulars Capital Brought In By Bank A/c By Bank A/c By Bank A/c To Bank A/c To Bank A/c By Interest A/c Debit Credit 1,485,485.00 3,184,788.95 310,680.68 53,723.96 273,330.00 150,957.94 10,167.15 Balance
(1,485,485.00)

Capital A/c
3-Mar-05Bank Recpt

NBFC A/c
8-Mar-05Bank Recpt 9-Mar-05Bank Recpt 15-Mar-05Bank Recpt 15-Mar-05Bank Pymt 18-Mar-05Bank Pymt 18-Mar-05JV
(3,184,788.95) (3,495,469.63) (3,549,193.59) (3,275,863.59) (3,124,905.65) (3,135,072.80)

Firm’s Broker A/c
4-Mar-05Bill 7-Mar-05Bill 8-Mar-05Bank Pymt 9-Mar-05Bank Pymt 11-Mar-05Bill 11-Mar-05Bill 15-Mar-05Bank Pymt By Investment A/c - Purchase By Investment A/c - Purchase To Bank A/c To Bank A/c By Investment A/c - Purchase To Investment A/c – Sales To Bank A/c 3,184,788.95 310,680.68 3,184,788.95 310,680.68 53,723.96 273,330.00 53,723.96 33
(3,184,788.95) (3,495,469.63) (310,680.68) (0.00) (53,723.96) 219,606.04 273,330.00

Margin Funding 15-Mar-05Bank Recpt 16-Mar-05Bill 18-Mar-05Bill 18-Mar-05Bank Recpt 4-Mar-05Bill 7-Mar-05Bill 11-Mar-05Bill 16-Mar-05JV 16-Mar-05Bill 18-Mar-05Bill By Bank A/c To Investment A/c – Sales By Investment A/c - Purchase By Bank A/c To FIRM’S Broker A/c To FIRM’S Broker A/c To FIRM’S Broker A/c By P&L on Investments By FIRM’S Broker A/c To FIRM’S Broker A/c 273,330.00 150,957.94 155,600.34 150,957.94 3,184,788.95 310,680.68 53,723.96 11,046.11 150,957.94 155,600.34
150,957.94 (4,642.40) (155,600.34)

Investment A/c – funded
3,184,788.95 3,495,469.63 3,549,193.59 3,538,147.48 3,387,189.54 3,542,789.88

Investment A/c – collateral
3-Mar-05Bill 11-Mar-05Bill 11-Mar-05JV To Capital Brought In By FIRM’S Broker A/c To P&L-profit on sale of invt. 1,485,485.00 273,330.00 5,595.00
1,485,485.00 1,212,155.00 1,217,750.00

Bank Book
3-Mar-05Bank Recpt 8-Mar-05Bank Recpt 8-Mar-05Bank Pymt 9-Mar-05Bank Recpt 9-Mar-05Bank Pymt 15-Mar-05Bank Recpt 15-Mar-05Bank Pymt 15-Mar-05Bank Recpt 15-Mar-05Bank Pymt 18-Mar-05Bank Recpt 18-Mar-05Bank Pymt To Capital Brought In To NBFC A/c By FIRM’S Broker A/c To NBFC A/c By FIRM’S Broker A/c To NBFC A/c By FIRM’S Broker A/c To FIRM’S Broker A/c By NBFC A/c To FIRM’S Broker A/c By NBFC A/c To NBFC A/c 3,184,788.95 3,184,788.95 310,680.68 310,680.68 53,723.96 53,723.96 273,330.00 273,330.00 150,957.94 150,957.94 10,167.15
3,184,788.95 310,680.68 53,723.96 273,330.00 150,957.94 -

Interest A/c
18-Mar-05JV
10,167.15

Profit & Loss on Investment A/c
16-Mar-05JV 11-Mar-05JV To Investment Loss By Invt - Collateral 11,046.11 5,595.00
11,046.11 5,451.11

Trial Balance
Debit Capital A/c NBFC A/c Broker A/c Investment A/c- funded Investment A/c- collateral Bank Book Credit (1,485,485.00) (3,135,072.80)

(155,600.34) 3,542,789.88 1,217,750.00 34

Margin Funding Interest A/c P&L 10,167.15 5,451.11 4,620,557.80

(4,620,557.80)

Date

Margin Statement Open Market value MTM P&L Total Available Minimum Margin Portfolio of Portfolio at for today Margin after hair-cut required Value at EOD & MTM original Cost

Margin shortfall/Excess ( after hair-cut)

In value 1 2 3 4=18+19

In %

In %

In value

In %

In value

5= 6 4/2*100 32% 29% 23% 24% 21% 21%

7=6*2/100 8=5-6 9=7-4

4-Mar-05 3,184,789 7-Mar-05 3,495,470 11-Mar-05 3,549,194 16-Mar-05 3,387,190 18-Mar-05 3,542,790 21-Mar-05 3,539,964

3,168,297 3,490,814 3,523,087 3,349,658 3,445,037 3,444,737

(16,492) 1,023,347 11,836 (21,450) (22,472) (60,221) 1,586 1,024,327 814,944 787,593 720,197 718,697

30%

950,489

2% -1% -7% -6% -9% -9%

72,858 (22,918) (241,982) (217,304) (313,314) (314,724)

30% 1,047,244 30% 1,056,926 30% 1,004,897 30% 1,033,511 30% 1,033,421

Continued…
Additional Position can be taken for Unutilized Margin Cash Funding Margin Coverage Limit ( before hair-cut) Approved Limit Available Available Utilized Margin in Margin in % cash Non-cash Cumulative MTM

10

In % In value 12

In % In value 1314= 15 15/2*100 47% 1,485,485 42% 1,469,975 34% 1,201,500 35% 1,178,750

16

17

18

1920=2-1

242,860 -

0 0

15,000,000 15,000,000 15,000,000 15,000,000

21% 23% 24% 23%

-

1,039,840 1,028,983 841,050 825,125

(16,492) (4,656) (26,106) (37,532)

0 (3,495,470) 0 (3,275,864)

35

Margin Funding 0 (3,135,073) 0 34% 1,168,500 34% 1,162,750 15,000,000 15,000,000 24% 24% 817,950 813,925 (97,753) (95,228)

Conclusion
Margin Trading enables trading by paying only a predetermined percentage of the total value of securities purchased. Margin Trading acts as a leverage mechanism. It injects liquidity in the market and provides an avenue of investment. It raises the purchasing power of the investor and also the possibility to reap substantial profits if one can predict the market movements.

36

Margin Funding

Definitions:
BSE DP EOD F&O HNI MTF MTM NBFC NSE POA – The Stock Exchange, Mumbai - Depository Participant Beneficiary Account of Client - End-of-Day – Futures & Options / Derivatives Segment – High Networth Individual Clients – Margin Funding Trades – Mark-to-Market Margins – Non-Banking Finance Company – National Stock Exchange of India Ltd. – Power of Attorney given by Client to NBFC

37

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