Sebi tweaks framework for stock brokers' risk mgmt capabilities

Markets regulator Sebi on Monday came out new guidelines forstock brokers with regard to entering risk-reduction mode, as part of efforts to bolster their risk management capabilities.

The decision has been taken after consultations with various stakeholders, the Securities and Exchange Board of India (Sebi) said in a circular.

The criteria for entering the risk-reduction mode for brokers with regard tooperationalisation of the interoperability among clearing corporations has been revised.

"... stock brokers shall mandatorily put in risk-reduction mode when 90 per cent of the stock broker's collateral available for adjustment against margins gets utilised on account of trades that fall under the margining system," Sebi said.

Prior to this circular, stock exchanges had to ensure that stock brokers are mandatorily subjected to risk reduction mode on utilisation of 85 per cent of the broker's collateral available for adjustment against margins.

Sebi has asked stock exchanges and clearing corporations toput in place requisite infrastructure and systems for implementation of the new framework.

Interoperability permits trading members to clear trades through a firm of their choice instead of going through the clearing corporations owned by the bourse on which the trade was executed.