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Client Level Collateral


A. Addition of Collaterals

  • While depositing collateral, the Clearing Members (CMs) shall allocate the collaterals into proprietary account of CM, and/or proprietary account of any Trading Member (TM) clearing through the CM, and/or account of any of the clients clearing through the CM, and/or of any of the clients trading through the TM who in turn is clearing through the CM.
  • The benefit for collateral deposited shall be provided by IIBX Clearing only after receiving the allocation of the same from the CM.
  • The amount of collateral allocated shall not exceed the amount of collateral received by the TM/CM from the client and reported as such under the client collateral reporting mechanism. Also, the allocation of collateral shall not be lower than the amount of collateral reported under the client collateral reporting mechanism as having been passed on by the CM to IIBX Clearing.
  • CMs shall also perform the aforementioned checks in respect of the allocation received by them from the TMs clearing through them.
  • The total allocation by CM cannot exceed the total collateral deposited by the CM with IIBX Clearing.
  • The allocation provided by the CM to IIBX Clearing shall be considered as final by IIBX Clearing for the purpose of granting exposure and utilization during default.
  • The detailed procedure for addition and allocation of various forms of collateral is specified in Annexure 1.

B. Blocking of Margins and Monitoring
  • The procedure for blocking of margins specifies the order of blocking of collateral available with IIBX Clearing. There shall be no change in the requirement of collection of upfront margins by the TM/CM. The TM/CM shall be required to ensure that sufficient collateral is allocated to clients to cover their margin collection requirements.
  • The TM/CM collateral shall mean the proprietary collateral of the TM/CM only and shall not include the collateral of any of their clients.
  • On receipt of a trade from a client account, the margin shall first be blocked from the value of the client collateral. If the client collateral is not sufficient, the residual margin shall be blocked from the TM proprietary collateral of the TM of such client. If the TM proprietary collateral is also not sufficient, then the residual margin shall be blocked from the CM proprietary collateral of the CM of such TM.
  • In case of a trade from the proprietary account of a TM, the margin shall first be blocked from the TM proprietary collateral, and in case such collateral is not sufficient, then the residual margin shall be blocked from the CM proprietary collateral.
  • Margins based on trades from proprietary account of the CM shall be blocked from the proprietary collateral of the CM only.
  • Example of blocking of margins is provided at Annexure 2.
  • For monitoring of the risk reduction mode (90% utilization) and margin violation, the following procedure shall be adopted:
    • TM level risk reduction mode: Client margin in excess of 90% of the client collateral shall be identified for each client under a TM. The total of such client margin in excess of 90% of the client collateral, plus the proprietary TM margin shall be assessed against the TM proprietary collateral for monitoring of TM level risk reduction mode.
    • CM level risk reduction mode: Sum of client margin in excess of 90% of the client collateral for each client under a TM plus the proprietary TM margin, in excess of 90% of TM proprietary collateral shall be calculated as TM margin in excess of 90% of TM collateral. Sum of such margin for each TM clearing through a CM, plus sum of client margin in excess of 90% of the client collateral for each client clearing through such CM, plus the proprietary CM margin shall be assessed against the proprietary CM collateral for monitoring of CM level risk reduction mode.
  • Example for monitoring of risk reduction mode is provided at Annexure 3.

C. Change of allocation

  • CMs shall be permitted to change the allocation of collateral deposited with IIBX Clearing. CMs to ensure that the value allocated to any TM /client does not exceed the value of actual collateral received from that TM/client. However, such change of allocation shall be permitted subject to adequacy of available collateral with IIBX Clearing after the change vis-à-vis the margin obligation of CM/TM/ Client. Example for change in allocation is provided at Annexure 4.

D. Withdrawal of collateral

  • Collateral shall be released only if sufficient amount is available as un-allocated collateral. Accordingly, CMs shall ensure that sufficient amount is un-allocated prior to placing release request for collateral.
  • CMs can un-allocate collateral using the process specified in Annexure 4.

E. Deemed allocation and Short Allocation monitoring

  • CMs shall ensure that sufficient collateral is allocated to TM Prop/clients to cover their margin requirements. However, if the margin applicable at IIBX Clearing for a TM Prop/client in a segment exceeds the collateral allocated to the TM Prop/client, then the proprietary collateral of the TM/CM shall be blocked. Such margin blocked from the proprietary collateral towards a TM Prop/client’s margin shall be deemed to have been the collateral allocated to that TM Prop/client. This provision shall include deemed allocation of TM’s proprietary collateral towards client margins and deemed allocation of CM’s proprietary collateral towards TM Prop/client margins. Examples for deemed allocation has been provided in Annexure 2.
  • CMs shall ensure that allocated collateral for a TM Prop/client is at all times greater than or equal to the minimum margin collection requirement for the respective TM Prop/client in the respective segment.
  • In case where the allocated collateral in respect of a TM Prop/client, is falling short of minimum margin collection requirement, same shall be considered as short allocation and shall be subject to penalty.

The figures shown in various Annexures (examples) are illustrative only.

File Format : Collateral Allocation

Sample File : TCM0002_ALLOC_17062024


Addition and Allocation of Collateral

  • All Cash, FDR and SBLC placed towards margin deposit shall be available as common pool for allocation to CM Prop/TM Prop/Clients.
  • CMs can use the file upload mechanism as per the format specified for allocation of collateral from common pool to CM Prop/TM Prop/Clients.
  • The amount mentioned in the file would be the final allocation requested amount for the mentioned combination.
  • Accordingly, the value provided in the file shall replace the previous values for the mentioned combination.
  • Any amount added as collateral and not allocated shall remain as un-allocated collateral in the common pool. No exposure for the same shall be provided to any entity for such un- allocated collateral.
  • CMs shall provide records for allocation only where there is change in the value of allocation. In order to avoid rejections of file, CMs shall ensure that records where there is no change in value of allocation are not included.
  • CMs shall upload the file allocation in Collateral Management module.
  • Examples for allocation of fresh collateral

CM adds following collateral

Cash 10,00,000
FDR 50,00,000
SBLC 30,00,000
Total 90,00,000

Current and Proposed Allocation

Entity Amount already Allocated Amount Proposed to be allocated
CM 1 Prop 1,30,00,000 1,45,00,000
TM XYZ Prop 40,00,000 50,00,000
TM XYZ Cli ABC 0 10,00,000
TM XYZ Cli DEF 5,00,000 10,00,000
TM 123 Prop 50,00,000 70,00,000
TM 123 Cli 456 5,00,000 35,00,000
Total 2,30,00,000 3,20,00,000

The file to be uploaded by the CM shall have following records

Current Date Seg CM Code TM Code CP Code Cli Code Acc Type Amount Filler1 Filler2 Filler3 Filler4 Filler5 Filler6 Action
01-Mar-24 CO CM1       P 1,45,00,000             U
01-Mar-24 CO CM1 XYZ     P 50,00,000             U
01-Mar-24 CO CM1 XYZ   ABC C 10,00,000             U
01-Mar-24 CO CM1 XYZ   DEF C 10,00,000             U
01-Mar-24 CO CM1 123     P 70,00,000             U
01-Mar-24 CO CM1 123   456 C 35,00,000             U

Blocking of margins

Suppose the total available against various entities are as given below.

Entity Collateral
CMTM Prop 1000
TM-1 Prop 500
TM-1 Cli-1 300
TM-1 Cli-2 300

Trade-1: TM-1 Cli-2 trades with margin requirement of $ 100. Blocking of margin shall be as follows:

Entity Collateral Blocking
CMTM Prop 1000 0
TM-1 Prop 500 0
TM-1 Cli-1 300 0
TM-1 Cli-2 300 100

Trade-2: TM-1 Cli-1 trades with margin requirement of $ 600. Blocking shall be as follows:

Entity Collateral Blocking
CMTM Prop 1000 0
TM-1 Prop 500 300
TM-1 Cli-1 300 300
TM-1 Cli-2 300 100

Trade-3: TM-1 Cli-2 trades with revised margin requirement for Cli-2 of $ 600. Blocking shall be as follows:

Entity Collateral Blocking
CMTM Prop 1000 100
TM-1 Prop 500 500
TM-1 Cli-1 300 300
TM-1 Cli-2 300 300

Trade-4: TM-1 Cli-2 trades with revised margin requirement for Cli-2 of $ 900. Blocking shall be as follows:

Entity Collateral Blocking
CMTM Prop 1000 400
TM-1 Prop 500 500
TM-1 Cli-1 300 300
TM-1 Cli-2 300 300

In the above examples, the collateral of $ 500 blocked from the TM1-Prop, and the collateral of $ 400 blocked from CMTM Prop, shall be deemed to be allocated to TM-1 Cli-1 and TM- 1 Cli-2. The deemed allocation would be as follows:


Client Margin Blocked from Client Collateral Deemed allocation from TM-1 Prop Deemed allocation from CMTM Prop to TM1-Prop
TM-1 Cli-1 600 300 300 400
TM-1 Cli-2 900 300 600

To clarify, the deemed allocation from CMTM Prop to TM-1 Prop is $ 400, therefore the total TM-1 Prop collateral (including deemed allocated) would be $ 900 ($ 500 + $ 400). Out of this, the excess client margin would be considered to be deemed allocated to the respective client.


Monitoring of risk reduction mode

Suppose the total collateral available against various entities, along with their margin obligations, are as given below.

CM TM Client Collateral Margin CliMrgn>90%
CM-1 - Prop 1200 800 -
CM-1 TM-1 Prop 500 400 -
CM-1 TM-1 Client-1 800 780 60
CM-1 TM-1 Client-2 500 450 0
CM-1 TM-1 Client-3 400 380 20
CM-1 TM-2 Prop 500 200 -
CM-1 TM-2 Client-4 1000 920 20
CM-1 TM-2 Client-5 1000 880 0

TM level monitoring

In the above table, “CliMrgn>90%”, or client margin in excess of 90%, has been calculated as margin for the client less 90% of the client collateral. Risk reduction mode monitoring for TM shall be based on assessment of [TM Prop Margin + CliMrgn>90%] against the [TM Prop collateral]. Accordingly, margin utilization percentage of TM1 and TM2 would be as under:

  • Margin utilization percentage of TM1 = [400 + (60 + 0 + 20)] /500 = 96%
  • Margin utilization percentage of TM2 = [200 + (20 + 0)] /500 = 44%

In other words, for TM1 margin of $ 30 is in excess of 90% of its prop collateral, while there is no excess margin for TM2 against its prop collateral. The same have been tabulated below:

TM Total
CliMrgn>90% 		Prop Margin 90% of TM prop collateral TMMrgn>90%
TM-1 80 400 450 30
TM-2 20 200 450 0

CM level monitoring

In the above table, “TMMrgn>90%”, or TM Margin in excess of 90%, has been calculated as [CliMrgn>90% + TM Prop margin] in excess of 90% of TM prop collateral. Risk reduction mode monitoring for CM shall be based on assessment of [CM Prop Margin + TMMrgn>90%] against the [CM Prop Collateral]. Accordingly, margin utilization percentage of CM1 would be as under:

  • Margin utilization percentage of CM1 = [800 + (30 + 0)]/1200 = 69.1%

Change of allocation

1. Examples for checking for change in allocation

Suppose a SCM has following collateral:

Entity Cash
SCM Prop 200
Cli-1 200
Cli-2 200

Out of the total available cash of $ 600, suppose the SCM has provided an FDR of 400 to the CC (with 200 cash remaining with the member). Suppose, the FDR provided to the CC is allocated by the SCM as follows. Here, the SCM has chosen not to allocate any collateral to Cli-2 in the total collateral placed with the CC:

Entity Collateral Allocated
SCM Prop 200
Cli-1 200

Suppose the margin requirement is as follows:

Entity Collateral Margin Blocked
SCM Prop 200 160
Cli-1 200 150

Change in allocation: Example 1

The member shall be permitted to change the allocation as follows (i.e. the member chooses to consider the cash retained with it to be as $ 50 belonging to Cli-1 and $ 150 belonging to Cli-2):

Entity Collateral
SCM Prop 200
Cli-1 150
Cli-2 50

Change in allocation: Example 2

The member shall not be permitted to change the allocation as follows (i.e. the member chooses to consider the cash retained with it to be as $ 100 belonging to each client):

Entity Collateral
SCM Prop 200
Cli-1 100
Cli-2 100

This allocation shall not be permitted since Cli-1 has a margin requirement of $ 150.


2. Examples for change in allocation for release of Collateral

Current Proposed
Entity Amount Entity Amount
CM 1 Prop 1,30,00,000 CM 1 Prop 1,10,00,000
TM XYZ Prop 40,00,000 TM XYZ Prop 20,00,000
TM XYZ Cli ABC 0 TM XYZ Cli ABC 20,00,000
TM XYZ Cli DEF 5,00,000 TM XYZ Cli DEF 5,00,000
TM 123 Prop 50,00,000 TM 123 Prop 25,00,000
TM 123 Cli 456 5,00,000 TM 123 Cli 456 0
Unallocated   Unallocated (For release) 50,00,000
Total 2,30,00,000   2,30,00,000

The file to be uploaded by the CM shall have following records

Current Date Seg CM Code TM Code CP Code Cli Code Acc Type Amount Filler1 Filler2 Filler3 Filler4 Filler5 Filler6 Action
01-Mar-24 CO CM1       P 1,10,00,000             D
01-Mar-24 CO CM1 XYZ     P 20,00,000             D
01-Mar-24 CO CM1 123     P 25,00,000             D
01-Mar-24 CO CM1 123   456 C 0             D
01-Mar-24 CO CM1 XYZ   ABC C 20,00,000             U

All downward allocation records to be kept before the upward allocation records.


File Format for allocation

1. Allocation File Format

Member will load the allocation file in Clearing Member application

1.1. File Format – Comma separated

1.2. File nomenclature -

<MEMCODE>_ALLOC_<DDMMYYYY>.T<batchno>

MEMCODE – Primary member code

DDMMYYYY – Current business date

Batch No – Batch no will be unique four digit no

1.3. File Structure:

Sr.No. Field Details Data Type Length Description Sample Value
1 Current Date String 11 DD-MON-YYYY 01-Jun-2024
2 Segment String 3 CO-Commodity CO
3 CM Code String 6 Primary Member Code
of
Clearing Member 		TCM0002
4 TM Code String 5 Trading Member Code  
5 Fille1 String 12 Filler. Reserved for future.  
6 Cli Code String 10 Client Code  
7 Account Type String 1 Prop – P, Client - C P
8 Amount Number 15,2 Amount 10000
9 Fille2 String 20 Filler. Reserved for future.  
10 Filler3 String 20 Filler. Reserved for future.  
11 Filler4 String 20 Filler. Reserved for future.  
12 Filler5 String 20 Filler. Reserved for future.  
13 Filler6 String 20 Filler. Reserved for future.  
14 Filler7 String 20 Filler. Reserved for future.  
15 Action String 1 U-Upward, D-Downward D

Note:

  1. Max 1000 records will be accepted in allocation file.
  2. The amount mentioned in the file would be the final allocation requested amount for the mentioned combination. Accordingly, the value provided in the file shall replace the previous values for the mentioned combination.
  3. In case of allocation to CM Prop, values in TM Code, CP Code, Cli Code will be blank
  4. In case of allocation to TM Prop, values in CP Code, Cli Code will be blank
  5. In case of allocation to CP, values in TM Code, Cli Code will be blank
  6. Examples of various records are as under

Sr.No. Particulars Record Format
1 CM Prop allocation record 01-Jun-2024,CO,TCM0002,,,,P,1000,,,,,,,U
2 TM Prop allocation record 01- Jun-2024,CO,TCM0002,TM0002,,,P,1000,,,,,,,U
3 Client allocation record 01-Jun-2024,CO,TCM0002,TM0002,,XYZ,C,1000,,,,,,,U
4 Increasing client allocation from 1000 to 2000 01-Jun-2024,CO,TCM0002,TM0002,,XYZ,C,2000,,,,,,,U
5 Reducing client allocation from 2000 to 1000 01- Jun-2024,CO,TCM0002,TM0002,,XYZ,C,1000,,,,,,,D
6 Reducing client allocation to 0 01-Jun-2024,CO,TCM0002,TM0002,,XYZ,C,0,,,,,,,D

Sample :

File Name :TCM0002_ALLOC_17062024.T0001

File Records :

01-JUN-2024,CO,TCM0002,,,,P,110000,,,,,,,U

01-JUN-2024,CO,TCM0002,TM0002,,XYZ,C,10000,,,,,,,D