Description

BSE consolidates penalty structure for trading limit and position limit violations across equity cash, derivatives, currency, and securities lending segments.

Summary

BSE Indian Clearing Corporation Ltd has issued a consolidated summary of penalties applicable for trading limit violations (RRM violations) and position limit violations across various segments including Equity Cash, Equity Derivatives, Currency Derivatives, and Securities Lending & Borrowing. The penalty structure is progressive, increasing with repeated violations within a calendar month, and includes potential referral to the Member Committee for persistent violators.

Key Points

  • Trading limit violations incur 0.07% per day penalty plus escalating fixed penalties based on violation frequency and amount
  • Position limit violations at Trading Member/FPI/Mutual Fund level in equity derivatives attract 1% of violation value (min Rs. 5,000, max Rs. 1,00,000)
  • Currency derivatives position limit violations have progressive penalties starting from no penalty for first instance to Rs. 70,000+ cumulative charges from 11th instance
  • Client-level currency derivatives position limit violations incur Rs. 5,000 per violation per client per day
  • From 11th violation onwards in most categories, members are referred to Member Committee for suitable action
  • Penalties are collected from clearing members who may recover amounts from violating clients

Regulatory Changes

This circular consolidates existing penalty structures across segments into a unified reference document. No new penalties are being introduced; this is an informational consolidation for ease of reference by members.

Compliance Requirements

For Trading Members:

  • Monitor trading limits (RRM limits) to avoid violations across Equity Cash, Equity & Currency Derivatives, and Securities Lending & Borrowing segments
  • Track position limits at trading member level to prevent breaches
  • Maintain records of violation instances within each calendar month
  • Ensure client-level position limits are monitored and enforced

For Clearing Members:

  • Pay penalties levied for violations by their trading members and clients
  • Recover penalty amounts from clients who committed violations
  • Monitor aggregate position limits across all underlyings

Specific Violation Tracking:

  • Violations are counted cumulatively within a calendar month
  • Different penalty scales apply based on violation amount (≤ Rs 1 crore vs > Rs 1 crore)
  • Entity level penalties apply during ban period at 1% of violation value

Important Dates

  • Notice Date: October 24, 2025
  • Effective: Immediate (consolidation of existing penalty structures)

Impact Assessment

Market Impact: High - affects all trading and clearing members across multiple segments. The progressive penalty structure incentivizes strict adherence to trading and position limits.

Operational Impact: Members must implement robust risk management systems to monitor limits in real-time across equity cash, derivatives, currency, and securities lending segments. The escalating penalty structure (reaching Rs. 70,000+ cumulative plus per-instance charges) and Member Committee referrals from 11th violation create strong compliance incentives.

Financial Impact: Significant for repeat violators - penalties can accumulate quickly with 0.07% daily interest plus fixed charges. Maximum penalty for position limit violations capped at Rs. 1,00,000 per entity per stock per day, but can apply across multiple stocks and days.

Risk Management: The consolidated framework provides clarity on penalty expectations, enabling members to better assess compliance costs versus operational risks. The tiered structure allows for occasional inadvertent violations while imposing severe consequences for systematic non-compliance.

Impact Justification

Comprehensive penalty framework affecting all trading members across multiple segments with escalating financial consequences and potential referral to Member Committee