Description
NSE Clearing Limited revises penalty and additional margin framework for position limit violations in the Currency Derivatives Segment, with slab-wise additional margins ranging from 0.75% to 1.50% based on breach percentage.
Summary
NSE Clearing Limited (NCL) has issued Circular 010/2026 partially modifying Item 14.5 of the NCL Consolidated Circular (043/2025) and NCL Circular 064/2024. The circular revises the penalty and additional margin structure applicable when a trading member’s open position exceeds the prescribed position limit in the Currency Derivatives Segment.
Key Points
- Monetary penalties are tiered by number of violation instances, ranging from Rs. 5,000 for the first instance to Rs. 1,00,000 per instance from the 11th instance onwards.
- Additional margins are levied on a slab-wise basis depending on the percentage by which the position limit is breached.
- Additional margin is computed at end of day and blocked from the proprietary collateral of the Clearing Member on T+1 day before market hours open.
- The additional margin remains blocked until positions fall below applicable limits.
- From the 11th instance onwards, the member is also referred to the Member Committee for suitable action.
- Additional margin may increase or decrease on subsequent days based on changes in breach quantity or underlying price.
Regulatory Changes
This circular is a partial modification to:
- Item 14.5, Item 14 “Violations and Penalty” of NCL Consolidated Circular 043/2025 (NCL/CMPT/67752) dated April 29, 2025.
- NCL Circular 064/2024 (NCL/CD/65182) dated November 22, 2024.
Monetary Penalty Structure:
| Instances | Monetary Penalty |
|---|---|
| 1st instance | Rs. 5,000 |
| 2nd to 5th instance | Rs. 20,000 per instance |
| 6th to 10th instance | Rs. 50,000 per instance |
| 11th instance onwards | Rs. 1,00,000 per instance + Member Committee referral |
Additional Margin (Slab-wise):
| Breach as % of Limit | Additional Margin |
|---|---|
| 100% to less than 110% | 0.75% |
| 110% to less than 125% | 1.00% |
| 125% to less than 150% | 1.25% |
| 150% and above | 1.50% |
Additional margin is computed as: Additional Margin % × (Value of Underlying × Position Contracts in Breach × Lot Size)
Compliance Requirements
- Trading members in the Currency Derivatives Segment must monitor open positions to ensure they remain within prescribed position limits.
- Clearing Members must maintain sufficient proprietary collateral to absorb any additional margin blocked on T+1 in the event of a position limit breach by their trading members.
- Members with repeated violations (11th instance and beyond) should be prepared for referral to the Member Committee for further disciplinary action.
- Members must ensure positions are brought below applicable limits promptly, as additional margins are released only once positions are compliant.
Important Dates
- Circular Date: February 26, 2026
- Download Ref No: NCL/CD/73007
- Circular Ref No: 010/2026
- Effective date not explicitly stated; members should treat this as immediately applicable per NCL standard practice.
Impact Assessment
This circular primarily impacts trading members and their associated Clearing Members in the Currency Derivatives Segment who operate close to or at position limits. The slab-wise additional margin structure creates a progressive disincentive for breaching position limits, with margin burdens escalating significantly for larger breaches (up to 1.50% of notional value). The T+1 blocking mechanism ensures swift enforcement without disrupting intraday operations. Repeat offenders face escalating monetary penalties and eventual regulatory scrutiny through Member Committee referral, making compliance with position limits critical for members active in currency derivatives trading.
Impact Justification
Partial modification to existing penalty framework for currency derivatives segment members; affects trading members who breach position limits but does not introduce entirely new regulatory requirements.