Brokers to be placed in risk reduction mode from next week: NSE

To enhance risk management capabilities, the NSE has said trading members will be compulsorily placed in risk reduction mode when 90 per cent of the members’ capital is utilised towards margins.

The new framework will be effective from December 17, 2018, the National Stock Exchange (NSE) said in a circular.

“Member shall be compulsorily placed in a risk reduction mode when 90 per cent of the member’s capital is utilised towards margins,” it added.

The stock broker will be moved back to the normal risk management mode as and when the utilisation goes below 85 per cent.

In case a member moves into risk reduction mode, all the unexecuted orders would be cancelled, the exchange said.

Fresh orders placed by members to reduce open positions will also be accepted, it added.

Besides, fresh orders placed by members that increase open positions would be checked for sufficiency of margins and those which do not satisfy sufficiency of margins would be rejected. Also, such fresh orders can be placed for immediate or cancel (IOC) only.

An immediate or cancel order (IOC) in market parlance refers to requirement of all or part of the order to be executed immediately, and any unfilled parts of the order are cancelled.

National Stock Exchange of India Ltd (NSE)