NSE revises limit for risk reduction mode in currency futures

Leading bourse National Stock Exchange (NSE) today said it has decided to revise the threshold for activation of risk reduction mode for clearing members on its currency derivatives segment from Wednesday.
Under the revised norms, the risk reduction mode (RRM) would be activated when 90 per cent of the clearing members' collateral available for adjustment against margins are utilised.
This is against the current practice of activating the mode on 100 per cent utilisation of collateral deposited.
RRM is not essentially a type of order but a mode into which a member is put into when he violates his collateral limit.

"The members shall be compulsorily placed in risk reduction mode when 90 per cent of the member's capital/limit is utilised towards margin. Further, the members will be able to trade in normal mode as and when the utilisation goes below 85 per cent," NSE said in a circular.
"The circular shall be effective from November 29, 2017," it added.

Rival bourse BSE has implemented the new norm in its currency derivatives and interest rate futures from today in an effort to align risk management practices across segments.
When a member's collateral falls cross the threshold, he will be allowed to put only risk reducing orders and will not be allowed to take any fresh positions.

A member who has entered the risk-reducing mode will be allowed to put only one risk reducing order at a time.