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The following types of margins are collected from the members on the trading positions as a part of the risk management system:

Daily Margin
For the purpose of imposition of the daily margins, the members of the Exchange are categorised into two categories, i.e., Type -I members who are allowed to carry-forward their trades in 'A' group scrips from one settlement to another and Type-II members who have not opted to carry-forward their trades.

The Type-I members are required to pay daily margin on their trades in 'A' group scrips both for delivery as well as carry-forward at the rate of 10%. The members also have to pay mark-to-market margin on their positions in these scrips provided the mark-to-market margin amount exceeds the amount already paid on daily margin as specified above, and in such cases the difference between the two margins is required to be paid. The Exchange collects daily margins from Type-I members for their transactions in 'B1' and 'B2' group scrips and from Type-II members for their transactions in 'A', 'B1' and 'B2' group scrips based on the outstanding positions in the market. The margins are computed on the basis of gross exposure of the members and the higher of the gross exposure margin or MTM margin is payable.

Mark-to-Market Margin
The Exchange collects mark-to-market (MTM) margin in addition to the above margin. While calculating MTM all notional profits of the members are ignored and all notional losses are collected on a daily basis. The members are, thus, required to pay the higher of daily margin or MTM margin. By introducing MTM margin, the management of risk on the outstanding position of the members has considerably improved.

The margins are debited to the members bank accounts on the next day of the trade (i.e.,T+1). In case of delay in payment of daily margin, a late fee @ 1% of the amount involved is imposed.

Further, if there are frequent delays or non-payment of margins by the members, the intra-day trading limits and gross exposure limits of members are curtailed and their BOLT Trading Work Stations (TWSs) are deactivated for a specified period. Such cases are also referred to the Disciplinary Action Committee for taking disciplinary action against members.

Earlier, the daily margins were computed manually by the members and paid to the Exchange on the following day. Hence, there was a scope for evasion of margins by the members. Such evasions could come to the notice of the Exchange only at the time of inspection of the books of the members. In order to ensure strict compliance of the margin requirements, the Exchange has developed a software for calculation of daily margins. Since November 1996, the daily margins are computed by the Exchange and the same are downloaded by the members in their back-office system. This has almost entirely eliminated the possibility of margin evasion by any member and has resulted in better risk management.

The Exchange has also started accepting Fixed Deposit Receipts FDR(s) and Bank Guarantees issued by Mumbai based branches of Scheduled Commercial Banks and specified Scheduled Co-operative Banks from the members towards their margin payments.

Carry Forward Margin
Carry forward margin is payable by Type I members in respect of their transactions carried forward in 'A' group scrips from one settlement to another settlement as per the BRS on Carry Forward System. This margin is at present 15% of the value of transactions carried forward..

Incremental Carry Forward Margin
The Exchange recovers incremental carry forward margin if the outstanding position in a scrip at the Exchange exceeds 3% of the paid-up and issued capital of the Company (in terms of number of shares). This margin is applicable to both purchase and sale positions carried forward. For every increase of 1% or part thereof beyond the threshold limit of 3%, incremental carry forward margin is charged on a graded scale as shown below:

Additional Carry Forward Margin
The Exchange has introduced the concept of Additional Carry Forward Margin with effect from August 27, 1999. This margin seeks to plug the loophole in the existing system of charging Incremental Carry Forward Margin where only the quantity of scrips carried forward was being considered and not the value. Thus, scrips in which the gross outstanding market position (TB+SB+MB) or the net outstanding market purchase position (TB+SB-MB) after the badla session exceeds the prescribed limits, the same would be subjected to ACFM at the rates mentioned below:

Further, in case any scrip attracts ACFM and also ICFM, the higher of ACFM or ICFM is recovered from the members.

Additional Volatility Margin
In order to contain volatility in the prices of scrips and to provide an exit route to Investors, SEBI had, inter alia, directed the Stock Exchanges to introduce additional margin called Volatility Margin on a graded basis. Volatility in any scrip is computed on a rolling basis over a period of six weeks.

The computation of volatility and the percentage of Additional Volatility Margin applicable are as under:

# is the highest price of the scrip in the immediately preceding six settlements

Volatility in percentage terms	Percentage of volatility margin applicable
40% and above but less than 50%	5%
50% and above but less than 70%	10%
70% and above but less than 90%	15%
90% and above	20%

The AVM is computed on the net outstanding position of the members in the scrip which has attracted this margin. If a scrip attracts Additional Volatility Margin and Mark-to-Market margin, then higher of the two is recovered. Additional Volatility Margin is not computed for scrips quoting below Rs. 40/-.

Special Margin
Since February, 1996, with a view to curtail unwarranted rise in the prices and volumes, special margins have been introduced. The special margins, which may range from 25% to 100% are imposed on net cumulative purchases in scrips in which rise in price is abnormal and high volumes are noticed.

Special Ad-hoc Margin
In order to caution the members from building position in low cap and infrequently traded B2 group scrips, the Exchange recovers special ad-hoc margin if a member build up a buy or sell position in a single B2 group scrip beyond Rs. 3 millions and Rs. 15 millions in all B2 group scrips in a settlement. The rate of special ad-hoc margin varies between 25% and 100%.

Ad-hoc Margin
As a risk management measure, Ad-hoc margins are imposed on members over and above the daily margins in case members have excessive purchase positions, concentrated purchase positions in some scrips or their financial position does not appear to be sound vis-a-vis their exposure in the market.

The purpose of the margin, as in case of other margins, is to ensure safety of the market. The statistics of 1997 and 1998 of surveillance action initiated against members show that compliance level in payment of margins has improved substantially.

Surveillance Actions initiated against Members
No.	Particulars	1997	1998
1.	BOLT TWS deactivated	25	18
2.	Trade restrictions imposed	12	18
3.	Disciplinary action by DAC	14	Nil
4.	Ad-hoc margins called (Rs. in crores)	38.12	49.63
5.	Instances of late payments of margins inviting fines	953	695

De-Activation of BOLT Terminals
The BOLT TWS of the members are deactivated for nonpayment/late payment of margins or on apprehension of financial difficulties or for violating trading restrictions placed on them. These decisions are taken on a case-to-case basis. In 1998, compared to 1997, the figures show high level of compliance in terms of payment of margin, etc.

As is well known, the markets have been very volatile on a few occasions in 1998. On some days the Index fluctuated by as much as ten per cent. Inspite of this, the Exchange did not have to deactivate even one Trader Work Station of a member for nonpayment of margin or delayed payment of settlement dues.