Description

ICCL introduces new risk management framework for pre-open session in equity derivatives, implementing order-level margin checks and revised margining rules effective for both single stocks and indices.

Summary

Indian Clearing Corporation Ltd (ICCL) has implemented a new risk management framework for the pre-open session in the Equity Derivatives segment. All orders during pre-open will be subject to mandatory margin sufficiency checks at the order level before inclusion. The framework applies SPAN + ELM margins without netting benefits, calendar spread advantages, or cross-margining during the pre-open session. This circular follows SEBI circular SEBI/HO/MRD/TPD-1/P/CIR/2025/79 dated May 29, 2025.

Key Points

  • All pre-open orders must pass margin sufficiency checks at order level before acceptance
  • Incoming orders subject to pre-risk management for SPAN + ELM margins at contract level
  • Risk parameters and maximum executable price considered during pre-open session
  • Order level margins assessed along with client’s brought forward portfolio at clearing member level
  • No netting of pre-open orders with brought forward portfolio or earlier offsetting pre-open orders
  • For offsetting pre-open orders at client contract level, higher of SPAN+ELM (long or short side) is considered
  • Margin benefits from calendar spreads and cross-margining not applicable during pre-open session
  • Framework applies to both single stock and index derivatives

Regulatory Changes

The circular implements point 5.6 of SEBI circular SEBI/HO/MRD/TPD-1/P/CIR/2025/79 regarding “Pre-open session for the derivatives market”. Key regulatory changes include:

  • Mandatory pre-risk management checks for all pre-open session orders
  • Elimination of netting benefits during pre-open session
  • Application of gross margining approach (higher of long/short side for offsetting positions)
  • Removal of calendar spread and cross-margin benefits during pre-open
  • Comprehensive margin sufficiency assessment at clearing member level combining new orders and existing portfolios

Compliance Requirements

For Trading Members:

  • Ensure all client orders during pre-open session meet margin sufficiency requirements
  • Implement systems to calculate SPAN + ELM margins at contract level during pre-open
  • Monitor overall margin sufficiency at clearing member level including brought forward portfolios
  • Accept orders only when aggregate margin requirements (new orders + existing portfolio) are met

For Clients:

  • Maintain adequate margins to support orders placed during pre-open session
  • Understand that netting, calendar spread, and cross-margin benefits are not available during pre-open
  • Ensure sufficient margin cover considering gross exposure on offsetting positions

Important Dates

  • Notice Date: December 03, 2025
  • Effective Date: Immediate implementation
  • Reference SEBI Circular Date: May 29, 2025
  • Reference ICCL Circular Date: May 30, 2025 (circular no: 20250530-26)

Impact Assessment

Market Impact:

  • Higher margin requirements during pre-open session may reduce order flow and liquidity
  • Elimination of netting benefits increases capital requirements for market participants
  • More conservative risk management approach enhances market stability

Operational Impact:

  • Trading members must upgrade systems to perform real-time margin calculations during pre-open
  • Increased margin monitoring and risk management workload for clearing members
  • Clients need to maintain higher margin buffers to participate in pre-open session

Risk Management Impact:

  • Strengthened pre-trade risk controls reduce potential for margin shortfalls
  • Gross margining approach during pre-open eliminates risk of inadequate margin coverage
  • Enhanced protection for clearing corporation and overall market integrity

Contact Information:

Impact Justification

Introduces significant changes to margin calculation and risk management framework for pre-open session in equity derivatives, affecting all trading members and their clients with immediate implementation