Margin Funding

Margin Funding

The Project

Submitted in partial fulfillment of the

requirement for the MASTER OF MANAGEMENT

STUDIES

Of

MUMBAI UNIVERSITY

By

HETAL A. DESAI

ATHARVA INSTITUTE OF MANAGEMENT STUDIES

2004-06

UNDER THE GUIDANCE OF:

VIPUL MALKAN

(RISK MANAGER)

INPUT FROM:

HOSHI BHARUCHA

ABHISHEK DIWEDI

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Margin Funding

ACKNOWLEDGEMENT

It gives me great satisfaction on completion of Summer

Project entitled MARGIN FUNDING and COMMODITY MARKET.

I am deeply indebted to Risk Manager - MR. VIPUL

MALKAN (J M MORGAN STANLEY) for sharing his insights on

the topics and for being a constant source of inspiration &

courage during the entire project work. He was always

available, correcting mistakes, intelligently directing me to

proper sources of information advising to aim for simplicity,

brevity, clarity and accuracy. I am indeed thankful to him for

his valuable guidance.

I would also like to express my special thanks to the VP - MR.

PRAMOD PARMAR (J M MORGAN STANLEY) for appointing me

as project trainee and for his help & co-operation during the

Project work.

I would also like to thank MR. HOSHI BHARUCHA, MR.

ABHISHEK DIWEDI and all others from J M MORGAN

STANLEY, for sharing their immense experience and extending

their support in carrying out this project work. I am greatly

acknowledged for their kind help.

DESAI HETAL A.

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Margin Funding

AIMS – M.M.S –

2004-06.

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Margin Funding

INTRODUCTION

Margin trading is a trading in the securities market with borrowed resources –

funds or securities. Margin Trading enables trading by paying only a predetermined

percentage of the total value of securities purchased. This predetermined percentage of

value is the “margin” that has to be paid towards purchase of securities. The balance

amount is paid by using borrowed funds. As margin trading is providing a facility to

investors to trade in the market with the margin money, it is essentially, a leverage

mechanism. It arises in a market where there is insufficient flow of the supply and

demand forces due to lack of adequate funds. Margin trading injects liquidity in the

market and provides an avenue of investment for risk taking investors and those willing

to finance them.

Margin trading enables the investors to increase their purchasing power and

raises the possibility to reap substantial profits if the market movements are according to

one’s expectations. It injects liquidity into the system which in turn adds to the depth of

the market and leads to an effortless formation of prices. It mitigates the quantum of

failed trades by supporting the buy and sell sides of trades for smooth settlement. A

sound margin policy can alter the credit flow in the economy. When the stock prices rise

continuously, imposing a high margin requirement would lower the demand for stocks

and thus halt the rising trend in prices on the flip side, certain adverse effects of margin

trading have also been noticed. J.K.Galbraith had mentioned margin loans as a major

cause for the gravity of the market downturn that brought forth the Great Depression. A

low margin requirement in stock index futures was cited by Brady Commission as a

reason for 1987 crash.

Margin loans reduce the credit available for more legitimate uses i.e. it affects

the way credit is allocated. The risks accompanying margin trading would be mitigated

if a well-drafted and active margin trading policy is instituted. Further there is a need for

a uniform and standardized margin requirement across the board. Otherwise each

brokerage house would set margins as per its whims and fancies. Competition would

force them to impose a set of low margins which would lead to a spate of possible

margin calls in the event of a down turn and lead to a possible enhanced volatility in the

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Margin Funding

market. Margin trading is an important form whereby the integration of money and

capital markets is achieved. In many countries there are margin requirements that

impose specific limits on the amounts that brokers and institutions can lend.

Present Status of Margin trading in India

Securities Contracts (Regulation) Rules, 1957 did not permit a broker to take up

any fund based activity. Hence, there was an apprehension that brokers would not be

able to lend funds for margin trading in view of provisions therein. This was examined

by SEBI in 1997 and a view was taken that a broker cannot lend funds as a regular

business activity or lending of funds cannot be his prime activity. The margin trading

issues were reviewed by SEBI in 2003 and based on the recommendation of its advisory

committee, the member-brokers have been allowed to provide margin trading facility to

their clients, in the cash segment.

The Reserve Bank of India (RBI) has instructed the commercial banks to provide

loans to individuals against physical securities up to Rs.10 lakh and Rs.20 lakh for

securities held in demat form. Further, guidelines issued by RBI, allow Banks to finance

margin trading subject to the following conditions

1) Within the overall ceiling of 5 per cent prescribed for exposure to capital market

2) A minimum margin of 40 per cent of the funds lent for margin trading

3) Shares purchased to be in demat mode under pledge to the lending bank

4) Bank’s Boards to prescribe necessary safeguards to ensure that no nexus

develops between inter-connected stock broking entities/stock brokers and the

bank in respect of margin trading.

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STEPS INITIATED BY SECURITIES AND EXCHANGE

BOARD OF INDIA

Liquidity is one of the important characteristics of a financial market. Illiquidity

can lead to “liquidity risk” which has been reported to drive away institutional/high net

worth investors from the market. Illiquidity / poor liquidity is known to have caused

high transaction costs. With a view to providing more liquidity in the Indian equity

market, SEBI has initiated steps to introduce margin trading with effect from April 1,

2004.

The salient features of margin trading prescribed by SEBI include:

a) It is available only with respect to the securities in Group 1 of the stock exchanges,

i.e. securities having mean impact cost of less than or equivalent to one per cent and

having traded at least for 80 per cent (plus or minus 5 per cent) of the days in the

previous 18 months;

b) Only corporate brokers with net worth of at least Rs.3 crores are eligible to offer this

facility;

c) A broker may use his own funds or borrow from the specified institutions;

d) A broker may borrow from scheduled commercial banks and/or NBFCs regulated by

RBI. A broker shall not be permitted to borrow funds from any other source.

e) Total indebtedness of a broker shall not exceed 5 times his net worth;

f) A broker is expected to be prudent and should ensure that no concentration takes place

in any single client;

g) The initial and maintenance margin for the client, shall be a minimum of 50 per cent

and 40 per cent respectively, to be paid in cash; and

h) The arbitration mechanism of the exchange shall not be available for grievances

arising out of this facility. A review of margin trading practices and regulatory

developments in other jurisdictions.

i) The broker shall maintain separate client wise accounts of the securities purchased on

margin trading with depositories and shall enable the client to observe the movement of

securities from his account (through Internet).

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j) The broker shall also maintain a separate record of details (including the sources) of

funds used for the purpose of margin trading.

Circular by SEBI on Margin Trading Facility

SEBI, based on the recommendations of the Secondary Market Advisory

Committee (SMAC) chaired by Dr R H Patil, issued a circular on March 19, 2004

specifying the regulatory framework for Margin Trading Facility. The Committee also

deliberated on the data (see tables 1.a and 1.b) made available by NSE/BSE regarding

the number of members offering the Margin Trading facility and the details of trading of

scrips in the normal segment vis-à-vis under the Margin Trading facility.

Table1.a

No of brokers (% of brokers) who are providing the Margin Trading Facility

Month Total No. of

members

Members eligible for

margin trading facility

Members providing

margin trading

facility

% to total

members

BSE NSE BSE NSE BSE NSE BSE NSE

Apr-04 843 784 11 11 2 2 18.18 0.26%

May-04 843 787 13 14 2 4 15.38 0.51%

Jun-04 843 791 13 16 3 4 23.08 0.51%

Jul-04 843 792 16 18 3 4 18.75 0.51%

Aug-04 843 793 17 21 3 4 17.65 0.50%

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Table 1.b

Outstanding positions and trading volume in scrips in the normal segment vis-à-vis the

trading of these scrips under Margin Trading Facility

Gross outstanding

positions at the

beginning

Fresh positions

during the month

Positions

liquidated during

the month

Gross outstanding

positions at the end

of the month

Total

Turnover in

the normal

segment

Month Amount (Rs. In

lakhs)

Amount (Rs. In

lakhs)

Amount (Rs. In

lakhs)

Amount (Rs. In

lakhs)

Amount (Rs.

In lakhs)

BSE NSE BSE NSE BSE NSE BSE NSE BSE NSE

April 1213.2 - (*) 30.34 4,554.65 70.03 2,348.05 1173.58 2,206.60 36.68 85.11

May 825.62 2,206.6 12.07 3,370.89 9.71 3,128.83 827.98 2,448.62 38.51 92.77

June 769.07 2,448.6 6.10 1,775.69 20.78 2,159.28 754.39 2,065.03 31.64 82.34

July 600.9 2,065.03 9.29 2,406.33 64.33 2,874.36 545.86 1,597.00 34.10 90.28

August 442.53 1,597.0 8.43 1,934.46 8.35 1,856.98 442.61 1,674.48 30.67 74.98

After deliberations, the Committee made the following recommendations:

Recommendations of the SMAC

1. Securities eligible for Margin Trading Facility

To expand the availability of eligible securities for margin trading, all the

securities which are offered in the Initial Public Offerings (IPOs) and which meet

the conditions for inclusion in the derivatives segment of the Stock Exchanges

may be made available for Margin Trading Facility also.

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2. Form of maintenance of margins

Fixed deposits with banks and Bank Guarantee may be treated as cash equivalent

and may be considered as acceptable form of initial and maintenance margins for

the purpose of availing the Margin Trading Facility.

3. No-objection certificate

Under the existing guidelines, before providing margin trading facility to a client

who has availed of margin trading facility from another broker, the broker is

required to obtain a no objection certificate in writing from the other broker.

However, there was no time limit specified for this purpose. It has now been

decided that the other broker would be obligated to convey his objection, if any,

within a period of 21 days, failing which the broker would be free to proceed

with providing margin trading facility to the client.

4. Further, the SMAC also felt that given the past history of misuse of carry

forward transactions, appropriate care and caution must be exercised in regard to

any scheme of margin trading. The SMAC was, therefore, not in favour of

recommending any other modification to the margin trading facility.

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MARGIN FUNDING PRODUCT

Product Description:

The Margin Funding product under the suite of secondary market products will

allow the broking company’s clients to undertake leveraged trading. Under this, clients

of the broking company can take positions in Equity Markets by paying margin of about

30% in form of cash and/or securities and seek funding for the balance.

Some broking companies will offer broking facility to its clients and NBFC will

finance the trades of the clients who want to take leverage positions.

Legal Entities to be used:

This product can be offered either by broking entity itself or through a Non Banking

Financial Company (NBFC) arm. In view of the following guidelines issued by SEBI/

Exchanges for margin funding by broker:

a) Minimum margin of 50% to be collected in Cash/ FD/BG form by the Broker

b) Reporting of client funded position on daily basis to exchanges.

Most of the broking companies are offering this product through their NBFC arm with

lower margin i.e. at 30% margin or lower.

Target Client Base:

This product is primarily targeted to the High Networth short term & medium term

positional traders. As the systems mature broking companies may offer this product to

retail clients.

Currently, F&O Segment offers only 118 scrips and 3 indices for trading.

Hence, clients can take arbitrage positions (cash-future/options positions) in these scrips.

Also this product will help take leveraged positions in the mid-cap liquid scrips to the

clients.

Process Flow:

The Transaction life cycle will work as under:

a) Client will sign up the relevant documentation requirement including

irrevocable POA with NBFC for both funds and securities. He will also

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fulfill the broking requirements. Various control points for POA would be

adhered too.

b) The Pay-in/Pay-out of funds / securities would be handled through above

designated account only.

c) Client will pay the requisite margin to NBFC.

d) On T+2, the Broking would first release the securities / funds for purchase

/sale transaction and then NBFC will release the funds / securities for

settlement of account.

e) NBFC will maintain the books of account including the stock accounting on

behalf of the clients.

f) Periodical reconciliation would be carried-out for both funds / securities at

each client level.

g) Broker will monitor the over-all exposure for clients & requisite margin

coverage. If a client fails to pay margins in time, broker will square up the

positions to bring down the margin call.

A) Flow for Initial Funding for Purchase of Shares

a) Client will pay 30% margin and shall be deposited in to Bank A/c opened under

POA.

b) Based on Margin receipts, Broker will set an exposure limit.

c) Client will purchase Shares through the Broker.

d) On T+2 (payout) broker will transfer Securities in DP A/c where NBFC will

have POA.

e) NBFC will transfer balance fund to Client Bank A/c

f) From Bank A/c balance fund will be paid to Broker.

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Note: Above Flow-chart is prepared assuming the entire margin given by client in cash from. Client may also give margin in non-cash form i.e. securities.

B) Flow for Squaring-up of Funded Purchased Position

a) In case Clients’ want to square up the existing funded purchase position then he

will place an order with Broker.

b) Broker will execute the trade after checking for existing open position.

c) On T+2 (pay-out), the Broker will pay 100% Pay-out of funds for sale

consideration to Clients a/c

d) On T+2 NBFC will release the shares to Broker for meeting the pay-in

obligation.

e) NBFC after deducting Principal and Interest will remit the balance fund to client.

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DP A/C

BROKER

NBFC CLIENT

BANK A/C

70% Fund

30% Fund

Pay-Out of Shares(T+2 Day)

10% pay-In of Funds (T Day)100% pay-In of Funds(T+1 Day)

NBFC CLIENT

BANK A/C

DP A/C

BROKER

Balance Amt.Loan Amt. + Interest

100% Fund (T+2 Day) 10% Shares (T Day)

Pay-In of Shares 90%(T+1 Day)

Margin Funding

Note: Above Flow-chart is prepared assuming the entire margin given by client in cash from. Client may also give margin in non-cash form i.e. securities.

Brokers offering Margin Trading

Currently all the significant secondary market players in India are offering this

product to their clients. These brokers include:

Broker Name Book Size

Kotak Securities Rs. 400 crores

India Bulls Rs. 400 crores

Motilal Oswal Securities Rs. 150 crores

Anagram Securities Rs. 65 crores

SSKI Rs. 30 crores

Refco Securities Already active through Citi Bank &

commencing through NBFC route

Fortis Securities (a Ranbaxy

Arm)

NA

ILFS Investmart NA

DSP Merrill Lynch Shortly commencing

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Documentation requirement:

Client needs to sign the following documents:

Broker Documentation

Member – Client Agreement

Client Registration Form

Risk Disclosure Document

Authority letters – Running Account, Family Account Adjustments etc.

NBFC Related Documentation:

Funding Agreement including authorisation of square up.

Irrevocable Power of Attorney (POA) for operating the Bank.

Irrevocable Power of Attorney (POA) for operating the DP.

Account Opening form for opening Bank A/c with particular Bank

Account opening form for opening DP A/c.

Client shall also supply the relevant supporting document required for opening

the corresponding Accounts with Broking Company, Bank, DP desk.

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Risk Containment Measure

Following process would be followed in order to contain risk involved in

Margin Funding:

1)Process:

Client will register itself with both i.e. with Broking company for Brokerage

A/c and with the NBFC for Loan A/c.

Client will place the adequate margins with NBFC.

Broking company will approve the eligible limits.

Broking company will set the exposure limits in mid-office and monitor the

trades of clients.

Client will settle the account with NBFC and in turn NBFC (holding POA),

will settle account for client with the broking company.

2)Eligible Clients:

Initially the product would be offered to HNI category of clients. Later on the

product may be offered to Retail Clients.

Product would be offered to fund the clients’ purchases in Cash Segment.

Broking company will approve the margin funding limits to approved clients.

Any upward revision in the client limits will be subject to appropriate

approvals

Funding shall be offered to eligible clients by collecting margin. In

exceptional cases, the product may be offered at different terms considering

credit risk of client, security exposure, collateral offered etc.

The Margin Funding team will ensure completion of all documentation

including opening of Clients’ DP and Bank account with Power Of Attorney

(POA) in favour of NBFC.

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3)Cap on total corpus:

Broking entity and NBFC will co-ordinate very closely for the individual

client limits and overall funding limits. NBFC will also create temporary

funding arrangements with banks against securities offered as collateral /

security / pledged by clients.

4)Approved Security for Trading:

Broking Company will notify the list of approved securities wherein Margin

Funding facility would be offered to the clients.

These Securities would be determined based on liquidity / market

capitalization criteria.

The list of approved scrips will be notified from time to time and also

reviewed for its liquidity and other factors.

In case any security categorized under non-approved category in which

clients’ are already holding the position then the client will be asked to

liquidate the position.

Portfolio Diversification: Client shall diversify portfolio by not taking

position in excess of 40% of approved client limit in any specific scrip.

Broking firm will monitor the same on end of day basis and will request the

client to settle the excess quantity in normal transaction.

5)Approved Collateral:

Margin would be accepted from client in the form of Cash and/or approved

securities given as collateral.

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Client will transfer all securities offered as collateral in DP A/c (which would

be opened with Broking entity’s DP Desk) for which POA is given to NBFC.

This approved list basket would be drawn from the NSE approved list of

securities. NSE draws this list scientifically based on liquidity, volatility and

other factors. Currently, list comprises of 500 (approx.) liquid securities.

Approved list of securities for collateral would be categorized into A, B and

C group based on liquidity and other factors.

Haircut: The haircut at rate of 15%, 30% and 45% would be applied on

group A, B and C respectively.

In case any security is removed from the approved security list and if NBFC

is holding such security as collateral from any client then client will be asked

to replace such security within 10 working days and on failure of client to

replace it within sufficient time provided then no collateral benefit would be

given to client for such security.

MTM of collateral: The securities accepted from clients as collateral would

be marked-to-market on end-of-day basis at the closing price of security.

The criteria for considering particular scrip as approved security for trading

and approved collateral are as follows:

a) The market capitalization should be greater than Rs. 100 crores.

b) The Average Traded Value of Shares per day should be greater than Rs. 50

lakhs.

c) The Average Traded Quantity of shares per Day should be more than 25000

shares.

d) The close price of the scrip should be greater than Rs. 30.

e) The scrip should be an Approved Scrip of NSE / BSE for Collateral purpose.

f) The scrip is not an Operator driven Scrip.

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6)Liquidity Cap: (to mitigate liquidity risk)

To contain the liquidity risk, the following cap would be applicable:

Client specific Security Cap:

Each Client would be allowed to take the position in any security up to 1

time of the total number of securities traded on an average basis in that

security.

Total Security Cap:

NBFC, as a whole, will try to restrict the cumulative position of all

clients’ put together in any security upto 5 times of average no. of

securities traded. If this limit is breached then no fresh position would be

allowed to be taken by any client.

7) Exposure and Limits setting in Risk Management

System:

Based on the margin deposit and calculation of available exposure after

considering the financed amount, the Risk Management System would set-up

the limits in the Risk Management system for trade execution.

The dealers shall place orders through the Order Routing system (ORS) and

all orders shall be validated at the order level.

Dedicated personnel would be monitoring the open position at client level

and will take corrective actions.

8)Initial Margins and Margin Calls

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In order to avail this facility, client shall require to maintain the requisite

deposits with the NBFC @ rate of 30%. Client shall require to adhere following:

Account would be activated only after receipt of initial deposits towards

margins in cash / securities form.

Clients would be classified under following zones depending upon the

margin coverage with the NBFC from time to time:

Zone Margin Coverage Percentage vs. Positions

taken

Green 30% and above

Blue 20 – 30 %

Yellow 10 – 20 %

Red Below 10%

Appropriate action would be initiated by Broking firm for clients in

the Blue, Yellow and Red Zone.

9)Square Up Measures:

Squaring-up of positions will be initiated in the following scenarios:

Non-payment of margin calls where available client margin falls below 10%.

Cheque bouncing /demat instruction failing leading to available client

margins falling below 10%

Security removed from approved list of trading and client doesn’t liquidate

the same within 10 days

Security removed from approved list of collateral and client failed to pay

margin calls

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Client categorized as ineligible due to non-traceable, disputes, possible

default by client and any other circumstances leading to raising non-

confidence in client

Punching error or disputed position

Scrip Cap Limit Excession

10) Other Risk involved in Margin Trading

Sr.No. Risk Involved Risk Containment Measures

A Market Risk

1 Price Variation in extreme

volatile market

Continuous monitoring mark to market

variation loss on online basis. Relevant alerts

would throw up the violations, and

appropriate action can be taken based on

situations demands.

2 Liquidity Risk Margin trading will be allowed in approved

scrips only and which would be broadly

drawn from top-200 traded list.

3 Change in Interest Rate In order to meet volatility of interest rate

environment the interest rates are linked to

combination of fixed and floating rate.

4 Unexpected External Factors In situations of certain uncontrollable

external factors e.g. act of god/ earthquake /

war, appropriate corrective steps may have to

be taken to liquidate the portfolio and/or

additional margin calls will be made on the

client.

B Legal / Regulatory Risk

5 Legal risk Proper documentation should be in place duly

vetted by a recognized lawyer.

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6 Compliance risk It is essential that all the relevant Rules and

Regulations are adhered to.

7 Accounting Risk Proper Books of Accounts should be

maintained. Bank & DP accounts should be

reconciled regularly to reflect the correct data

and utilization of client money properly.

C

Operation Risk and Internal Compliance Risk

8 Operational risk - Is the risk

of errors and omissions,

misjudgment, negligence and

misfeasance, or through

uncertainty, misunderstanding

and confusion as to

responsibility and authority.

Comprehensive systems, operations &

procedure manuals should be in place

and be adhered to, in order to avoid the

operating errors.

Proper organization structure and staffing

should be in place to manage the

operational & risk aspects.

Trading function should be separated

from the settlement, accounting and risk

control functions.

Timely relevant MIS should be available.

Written confirmation / voice recording of

all verbal dealings should be adhered to

Periodic Internal audits should be carried

out of all functions

9 Punching Error at the time of

Order Entry / Cheque Receipt

All Dealers should trade through the Order

Routing System which would avoid punching

of non-existing client code & will subject to

client risk limit validation.

With periodical Bank & DP reconciliation,

the punching errors in cheque/scrip receipt

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entry would be controlled.

10 Securities releases in case of

debit balances

Programmed softwares have sufficient checks

to ensure that securities are not delivered to

clients in case of debit balances.

11 Access to Arbitration/ Investor

Protection Fund/ Settlement

Guarantee Fund

Arbitration Mechanism of the Stock

Exchanges would not be available to resolve

any disputes. Hence, all such disputed

matters would be referred to the Courts.

D Systems risk To contain the system risk, following

measures should be initiated

System architecture defining levels of

security to preserve integrity and

confidentiality of data

All application, front, mid & back-office,

should be thoroughly tested including

stress testing of it for peak volumes to

determine reliability & hard-ware support

Application & hardware should be

scalable.

Back up should be in place

E Firm Management Overview Risk Committee should be framed for

overall supervision & responsibility

Policies, procedures and internal

guidelines should be framed and be

adhere too.

Authority levels for Excess limit approval

should be set

Procedure for investigation / sign-off on

excessions and errors should be in place

Ethical standards and codes of conduct

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should be followed

Scenarios that can play out

1) Various Margin scenarios

a) Client brings 30% Cash Margin

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b) Client brings a mix of margin in cash and security (e.g. 10% in Cash and

20% in security)

c) Client brings 30% Scrip Margin

2) Various types of transactions

a) Part purchases and one go sale

b) One go purchases and Part sales

c) Open position being maintained

3) Purchase shortage of shares which is being delivered by Broking later

4) Purchase shortage of shares which is being closed out by Broking

5) Collateral scrip being sold by the client and against which the client has taken a

position

6) Client takes position in excess of available margins and maintains the same for 3 days

7) Shares are sold by client but same could not be delivered and hence shares are

auctioned

8) Trading Scrip is removed from approved list of trading scrips and client continues to

maintain position in that scrip

9) Trading Scrip is in Non Approved list of trading scrips and client sells the same.

10) Collateral Scrip is removed from approved list of Collaterals and the client continues

to maintain position based on such collaterals.

11) Position continue for a client who has been debarred from Margin Trading Facility

12) If client is funded by 2 or more NBFC then appropriation of funds on square up of

positions

13) Handling of Corporate Actions

a) in Collateral

b) in Traded securities

c) in Collateral and in Traded securities

14) Handling of merged settlement

15) Intraday non scheduled payment / stock releases due to contingencies

16) Changes in rate of interest from Mid period

17) Trade value revised after trade confirmation in FES due to changes in Broking Back

Office (e.g. change in Brokerage rate)

18) Trade rejection/reversal in FES after trade confirmation process / EOD Process

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19) Failure of Demat Instruction Slip for transfer/pledge.

20) Cheque being dishonoured / Bank Fund transfer being rejected

a) from NBFC to client

b) from Client to NBFC

21) Funds are not available with NBFC to fund the position and due to which stock is

withheld by Broking

22) Normal stock being transferred by Broking in Client POA Demat account which in

turn transferred to be used as collateral.

23) Normal stock being transferred by Broking in POA Demat account which is being

repaid to the client from POA.

EXAMPLES:

Given below are two examples that deal with Scenario 1& 2 in detail.

Scrip Date Qty Net Value Net Close - Mkt Value MTM Cost

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Rate Open C/F P&L ALOKTEXT 4-Mar-05 2353 68.85 162,004.05 B 2,353 68.45 161,062.85 (941.20) 162,004.05

CONCOR 4-Mar-05 188 863.49 162,336.12 B 188 863.05 162,253.40 (82.72) 162,336.12

D-LINK 4-Mar-05 1150 138.18 158,907.00 B 1,150 137.65 158,297.50 (609.50) 158,907.00

GRASIM 4-Mar-05 156 1,377.11 214,829.16 B 156 1,372.25 214,071.00 (758.16) 214,829.16

GSFC 4-Mar-05 1233 130.34 160,709.22 B 1,233 129.80 160,043.40 (665.82) 160,709.22

GSKCONS 4-Mar-05 642 337.35 216,578.70 B 642 335.50 215,391.00 (1,187.70) 216,578.70

HEROHONDA 4-Mar-05 282 564.17 159,095.94 B 282 560.20 157,976.40 (1,119.54) 159,095.94

ICI 4-Mar-05 651 248.89 162,027.39 B 651 247.55 161,155.05 (872.34) 162,027.39

IGL 4-Mar-05 2066 103.10 213,004.60 B 2,066 102.95 212,694.70 (309.90) 213,004.60

ITC 4-Mar-05 118 1,380.18 162,861.24 B 118 1,372.95 162,008.10 (853.14) 162,861.24

KECINTL 4-Mar-05 948 172.24 163,283.52 B 948 170.50 161,634.00 (1,649.52) 163,283.52

LUPIN 4-Mar-05 471 592.06 278,860.26 B 471 588.55 277,207.05 (1,653.21) 278,860.26

NTPC 4-Mar-05 2260 94.57 213,728.20 B 2,260 93.95 212,327.00 (1,401.20) 213,728.20

ONGC 4-Mar-05 119 898.92 106,971.48 B 119 892.45 106,201.55 (769.93) 106,971.48

PREMINSTR 4-Mar-05 3038 53.87 163,657.06 B 3,038 53.55 162,684.90 (972.16) 163,657.06

SCI 4-Mar-05 652 163.28 106,458.56 B 652 162.30 105,819.60 (638.96) 106,458.56

THERMAX 4-Mar-05 177 601.35 106,438.95 B 177 599.15 106,049.55 (389.40) 106,438.95

VIJAYABANK 4-Mar-05 4045 67.50 273,037.50 B 4,045 67.10 271,419.50 (1,618.00) 273,037.50

20,549 3,168,296.55 (16,492.40) 3,184,788.95

ALOKTEXT 7-Mar-05 2,353 67.00 157,651.00 (3,411.85) 162,004.05

CONCOR 7-Mar-05 188 868.05 163,193.40 940.00 162,336.12

D-LINK 7-Mar-05 1,150 139.55 160,482.50 2,185.00 158,907.00

GRASIM 7-Mar-05 36 1,370.72 49,345.92 B 192 1,369.10 262,867.20 (549.72) 264,175.08

GSFC 7-Mar-05 1,233 127.00 156,591.00 (3,452.40) 160,709.22

GSKCONS 7-Mar-05 642 335.85 215,615.70 224.70 216,578.70

HEROHONDA 7-Mar-05 282 562.50 158,625.00 648.60 159,095.94

ICI 7-Mar-05 651 245.50 159,820.50 (1,334.55) 162,027.39

IGL 7-Mar-05 2,066 104.70 216,310.20 3,615.50 213,004.60

ITC 7-Mar-05 36 1,378.65 49,631.36 B 154 1,366.10 210,379.40 (1,260.06) 212,492.60

KECINTL 7-Mar-05 948 168.45 159,690.60 (1,943.40) 163,283.52

LUPIN 7-Mar-05 471 596.00 280,716.00 3,508.95 278,860.26

NTPC 7-Mar-05 1112 93.92 104,439.04 B 3,372 92.20 310,898.40 (5,867.64) 318,167.24

ONGC 7-Mar-05 118 909.02 107,264.36 B 237 903.25 214,070.25 604.34 214,235.84

PREMINSTR 7-Mar-05 3,038 53.65 162,988.70 303.80 163,657.06

SCI 7-Mar-05 652 171.00 111,492.00 5,672.40 106,458.56

THERMAX 7-Mar-05 177 593.55 105,058.35 (991.20) 106,438.95

VIJAYABANK 7-Mar-05 4,045 70.30 284,363.50 12,944.00 273,037.50

21,851 3,490,813.70 11,836.47 3,495,469.63

ALOKTEXT 11-Mar-05 2,353 64.35 151,415.55 (6,235.45) 162,004.05

CONCOR 11-Mar-05 188 852.95 160,354.60 (2,838.80) 162,336.12

D-LINK 11-Mar-05 1,150 131.10 150,765.00 (9,717.50) 158,907.00

GRASIM 11-Mar-05 192 1,370.00 263,040.00 172.80 264,175.08

GSFC 11-Mar-05 433 124.07 53,723.96 B 1,666 122.40 203,918.40 (6,396.56) 214,433.18

GSKCONS 11-Mar-05 642 340.40 218,536.80 2,921.10 216,578.70

HEROHONDA 11-Mar-05 282 563.75 158,977.50 352.50 159,095.94

ICI 11-Mar-05 651 235.85 153,538.35 (6,282.15) 162,027.39

IGL 11-Mar-05 2,066 106.15 219,305.90 2,995.70 213,004.60

ITC 11-Mar-05 154 1,345.60 207,222.40 (3,157.00) 212,492.60

KECINTL 11-Mar-05 948 176.90 167,701.20 8,010.60 163,283.52

LUPIN 11-Mar-05 471 591.80 278,737.80 (1,978.20) 278,860.26

NTPC 11-Mar-05 3,372 93.50 315,282.00 4,383.60 318,167.24

ONGC 11-Mar-05 237 911.10 215,930.70 1,860.45 214,235.84

PREMINSTR 11-Mar-05 3,038 52.75 160,254.50 (2,734.20) 163,657.06

SCI 11-Mar-05 652 167.80 109,405.60 (2,086.40) 106,458.56

THERMAX 11-Mar-05 177 586.05 103,730.85 (1,327.50) 106,438.95

VIJAYABANK 11-Mar-05 4,045 70.45 284,970.25 606.75 273,037.50

22,284 3,523,087.40 (21,450.26) 3,549,193.59

26

Margin Funding

ALOKTEXT 16-Mar-05 2353 64.16 150,957.94 S - 64.10 - (457.61) -

P&L Acc (11,046.11)

CONCOR 16-Mar-05 188 842.00 158,296.00 (2,058.60) 162,336.12

D-LINK 16-Mar-05 1,150 132.90 152,835.00 2,070.00 158,907.00

GRASIM 16-Mar-05 192 1,340.35 257,347.20 (5,692.80) 264,175.08

GSFC 16-Mar-05 1,666 123.60 205,917.60 1,999.20 214,433.18

GSKCONS 16-Mar-05 642 355.05 227,942.10 9,405.30 216,578.70

HEROHONDA 16-Mar-05 282 553.65 156,129.30 (2,848.20) 159,095.94

ICI 16-Mar-05 651 236.95 154,254.45 716.10 162,027.39

IGL 16-Mar-05 2,066 105.00 216,930.00 (2,375.90) 213,004.60

ITC 16-Mar-05 154 1,335.20 205,620.80 (1,601.60) 212,492.60

KECINTL 16-Mar-05 948 176.05 166,895.40 (805.80) 163,283.52

LUPIN 16-Mar-05 471 574.45 270,565.95 (8,171.85) 278,860.26

NTPC 16-Mar-05 3,372 91.35 308,032.20 (7,249.80) 318,167.24

ONGC 16-Mar-05 237 909.15 215,468.55 (462.15) 214,235.84

PREMINSTR 16-Mar-05 3,038 52.30 158,887.40 (1,367.10) 163,657.06

SCI 16-Mar-05 652 164.65 107,351.80 (2,053.80) 106,458.56

THERMAX 16-Mar-05 177 582.05 103,022.85 (708.00) 106,438.95

VIJAYABANK 16-Mar-05 4,045 70.25 284,161.25 (809.00) 273,037.50

19,931 3,349,657.85 (22,471.61) 3,387,189.54

ALOKTEXT 18-Mar-05 - 62.35 - - -

CONCOR 18-Mar-05 188 855.10 160,758.80 2,462.80 162,336.12

D-LINK 18-Mar-05 1,150 133.50 153,525.00 690.00 158,907.00

ESABINDIA 18-Mar-05 609 170.35 103,743.15 B 609 170.65 103,925.85 182.70 103,743.15

GRASIM 18-Mar-05 192 1,290.35 247,747.20 (9,600.00) 264,175.08

GSFC 18-Mar-05 1,666 121.35 202,169.10 (3,748.50) 214,433.18

GSKCONS 18-Mar-05 642 343.85 220,751.70 (7,190.40) 216,578.70

HEROHONDA 18-Mar-05 282 539.10 152,026.20 (4,103.10) 159,095.94

ICI 18-Mar-05 651 233.75 152,171.25 (2,083.20) 162,027.39

IGL 18-Mar-05 2,066 103.15 213,107.90 (3,822.10) 213,004.60

ITC 18-Mar-05 154 1,311.15 201,917.10 (3,703.70) 212,492.60

KECINTL 18-Mar-05 948 180.30 170,924.40 4,029.00 163,283.52 KIRLOSKCUM 18-Mar-05 441 117.59 51,857.19 B 441 114.75 50,604.75 (1,252.44) 51,857.19

LUPIN 18-Mar-05 471 561.55 264,490.05 (6,075.90) 278,860.26

NTPC 18-Mar-05 3,372 89.70 302,468.40 (5,563.80) 318,167.24

ONGC 18-Mar-05 237 911.00 215,907.00 438.45 214,235.84

PREMINSTR 18-Mar-05 3,038 51.35 156,001.30 (2,886.10) 163,657.06

SCI 18-Mar-05 652 164.45 107,221.40 (130.40) 106,458.56

THERMAX 18-Mar-05 177 562.25 99,518.25 (3,504.60) 106,438.95

VIJAYABANK 18-Mar-05 4,045 66.70 269,801.50 (14,359.75) 273,037.50

20,981 3,445,037.15 (60,221.04) 3,542,789.88

Scenario1: Client brings 30% Cash Margin

Date Type Scrip Net CollateralScrip Name Qty Rate Value hair-cut Net Value

3/12/2005 Cash 1,000,000

Flow of Accounting Entries

Voucher VType Ledger A/c Particulars Debit Credit

27

Margin Funding

Date3-Mar-05 Bank Recpt Bank Book To Capital Brought In 1,000,000.00 3-Mar-05 Bank Recpt Capital A/c Capital Brought In 1,000,000.00 4-Mar-05 Bill Investment A/c To FIRM’S Broker A/c 3,184,788.95 4-Mar-05 Bill FIRM’S Broker A/c By Investment A/c - Purchase 3,184,788.95 7-Mar-05 Bill Investment A/c To FIRM’S Broker A/c 310,680.68 7-Mar-05 Bill FIRM’S Broker A/c By Investment A/c - Purchase 310,680.68 8-Mar-05 Bank Recpt Bank Book To NBFC A/c 2,184,788.95 8-Mar-05 Bank Recpt NBFC A/c By Bank A/c 2,184,788.95 8-Mar-05 Bank Pymt FIRM’S Broker A/c To Bank A/c 3,184,788.95 8-Mar-05 Bank Pymt Bank Book By FIRM’S Broker A/c 3,184,788.95 9-Mar-05 Bank Recpt Bank Book To NBFC A/c 310,680.68 9-Mar-05 Bank Recpt NBFC A/c By Bank A/c 310,680.68 9-Mar-05 Bank Pymt FIRM’S Broker A/c To Bank A/c 310,680.68 9-Mar-05 Bank Pymt Bank Book By FIRM’S Broker A/c 310,680.68

11-Mar-05 Bill Investment A/c To FIRM’S Broker A/c 53,723.96 11-Mar-05 Bill FIRM’S Broker A/c By Investment A/c - Purchase 53,723.96 15-Mar-05 Bank Recpt Bank Book To NBFC A/c 53,723.96 15-Mar-05 Bank Recpt NBFC A/c By Bank A/c 53,723.96 15-Mar-05 Bank Pymt FIRM’S Broker A/c To Bank A/c 53,723.96 15-Mar-05 Bank Pymt Bank Book By FIRM’S Broker A/c 53,723.96 16-Mar-05 Bill FIRM’S Broker A/c To Investment A/c - Sales 150,957.94 16-Mar-05 Bill Investment A/c By FIRM’S Broker A/c 150,957.94

16-Mar-05 JVProfit & Loss on Investment A/c To Investment Loss 11,046.11

16-Mar-05 JV Investment A/c By P&L on Investments 11,046.11 18-Mar-05 Bill Investment A/c To FIRM’S Broker A/c 155,600.34 18-Mar-05 Bill FIRM’S Broker A/c By Investment A/c - Purchase 155,600.34 18-Mar-05 Bank Recpt Bank Book To FIRM’S Broker A/c 150,957.94 18-Mar-05 Bank Recpt FIRM’S Broker A/c By Bank A/c 150,957.94 18-Mar-05 Bank Pymt NBFC A/c To Bank A/c 150,957.94 18-Mar-05 Bank Pymt Bank Book By NBFC A/c 150,957.94 18-Mar-05 JV Interest A/c To NBFC A/c 7,452.99 18-Mar-05 JV NBFC A/c By Interest 7,452.99

TOTAL 11,274,554.03 11,274,554.03

Ledger

Party Ledger for: 01/03/2005 To 18/03/2005Voucher

Date Vtype Particulars Debit Credit Balance

Capital A/c3-Mar-05 Bank Recpt Capital Brought In - 1,000,000.00 (1,000,000.00)

NBFC A/c8-Mar-05 Bank Recpt By Bank A/c 2,184,788.95 (2,184,788.95)

9-Mar-05 Bank Recpt By Bank A/c 310,680.68 (2,495,469.63)


18-Mar-05 Bank Pymt To Bank A/c 150,957.94 (2,398,235.65)

28

Margin Funding

18-Mar-05 JV by Interest A/c 7,452.99 (2,405,688.64)

Firm’s Broker A/c4-Mar-05 Bill By Investment A/c - Purchase 3,184,788.95 (3,184,788.95)

7-Mar-05 Bill By Investment A/c - Purchase 310,680.68 (3,495,469.63)

8-Mar-05 Bank Pymt To Bank A/c 3,184,788.95 (310,680.68)

9-Mar-05 Bank Pymt To Bank A/c 310,680.68 (0.00)

11-Mar-05 Bill By Investment A/c - Purchase 53,723.96 (53,723.96)


16-Mar-05 Bill To Investment A/c – Sales 150,957.94 150,957.94


18-Mar-05 Bank Recpt By Bank A/c 150,957.94 (155,600.34)

Investment A/c

4-Mar-05 Bill To FIRM’S Broker A/c 3,184,788.95 3,184,788.95

7-Mar-05 Bill To FIRM’S Broker A/c 310,680.68 3,495,469.63


16-Mar-05 Bill By FIRM’S Broker A/c 150,957.94 3,398,235.65

16-Mar-05 JV By P&L on Investments 11,046.11 3,387,189.54


Bank Book3-Mar-05 Bank Recpt To Capital Brought In 1,000,000.00 1,000,000.00

8-Mar-05 Bank Recpt To NBFC A/c 2,184,788.95 3,184,788.95

8-Mar-05 Bank Pymt By FIRM’S Broker A/c 3,184,788.95 -

9-Mar-05 Bank Recpt To NBFC A/c 310,680.68 310,680.68

9-Mar-05 Bank Pymt By FIRM’S Broker A/c 310,680.68 -



18-Mar-05 Bank Recpt To FIRM’S Broker A/c 150,957.94 150,957.94

18-Mar-05 Bank Pymt By NBFC A/c 150,957.94 -

Interest A/c18-Mar-05 JV To NBFC A/c 7,452.99 7,452.99

Profit & Loss on Investment A/c16-Mar-05 JV To Investment Loss 11,046.11 11,046.11

Trial Balance Debit Credit Capital A/c (1,000,000.00)NBFC A/c (2,405,688.64)Broker A/c (155,600.34) Investment A/c 3,542,789.88 Bank Book -

29

Margin Funding

Interest A/c 7,452.99 P&L 11,046.11 3,405,688.64 (3,405,688.64)

Margin StatementDate Open

Portfolio Value at original Cost

Market value of Portfolio at EOD

MTM P&L for today

Total Available Margin after hair-cut & MTM

Minimum Margin required

Margin shortfall/coverage

( after hair-cut)

In value In % In % In value In % In value 1 2 3 4=17+18+19 5=

4/2*1006 7=6*2/100 8=5-6 9=7-4

4-Mar-05 3,184,789 3,168,297 (16,492) 983,508 31% 30% 950,489 1% 33,019

7-Mar-05 3,495,470 3,490,814 11,836 995,344 29% 30% 1,047,244 -1% (51,900)

11-Mar-05 3,549,194 3,523,087 (21,450) 973,894 28% 30% 1,056,926 -2% (83,032)

16-Mar-05 3,387,190 3,349,658 (22,472) 962,468 29% 30% 1,004,897 -1% (42,429)

18-Mar-05 3,542,790 3,445,037 (60,221) 902,247 26% 30% 1,033,511 -4% (131,264)

21-Mar-05 3,539,964 3,444,737 1,586 904,772 26% 30% 1,033,421 -4% (128,649)

Continued…

Additional Position can be taken for Unutilized Margin

Cash Funding Margin Coverage ( before hair-cut)

Limit Approved

Limit Utilized %

Available Margin in cash

Available Margin in Non-cash

Cumulative MTM less realised P/L

In % In value In % In value 10 11 12 13 14 15 16 17 18 19

110,062 0 - 31% 983,508 10,000,000 32% 1,000,000 0 (16,492)

- 0 - 29% 995,344 10,000,000 35% 1,000,000 0 (4,656)

- 0 (2,184,789) 28% 973,894 10,000,000 35% 1,000,000 0 (26,106)

- 0 (2,549,194) 29% 962,468 10,000,000 34% 1,000,000 0 (37,532)

- 0 (2,398,236) 26% 902,247 10,000,000 35% 1,000,000 0 (97,753)

30

Margin Funding

- 0 (2,405,689) 26% 904,772 10,000,000 35% 1,000,000 0 (95,228)

Scenario 2: Client brings 30% Scrip Margin

Date Type Scrip Net CollateralScrip Name Qty Rate Value hair-cut Net Value

4-Mar-05 Scrip ACC 2000 374.00 748,000 30% 523,600 4-Mar-05 NTPC 5000 93.95 469,750 30% 328,825 4-Mar-05 ONGC 300 892.45 267,735 30% 187,415

1,485,485 1,039,840 7-Mar-05 Scrip ACC 2000 369.00 738,000 30% 516,600 7-Mar-05 NTPC 5000 92.20 461,000 30% 322,700 7-Mar-05 ONGC 300 903.25 270,975 30% 189,683

1,469,975 1,028,983 11-Mar-05 Scrip ACC 2000 367.00 734,000 30% 513,800 11-Mar-05 NTPC 5000 93.50 467,500 30% 327,250

1,201,500 841,050 16-Mar-05 Scrip ACC 2000 361.00 722,000 30% 505,400 16-Mar-05 NTPC 5000 91.35 456,750 30% 319,725



1,162,750 813,925

Date Scrip Name Qty Close c/f Value P&L A/c

11-Mar-05 ONGC 300 911.1 273,330 5,595

Flow of Accounting Entries

Voucher Date VType Ledger A/c Particulars Debit Credit

3-Mar-05 Bank RecptInvestment A/c-collateral To Capital Brought In 1,485,485.00

3-Mar-05 Bank Recpt Capital A/c By Investment A/c -collateral 1,485,485.00 4-Mar-05 Bill Investment A/c To FIRM’S Broker A/c 3,184,788.95 4-Mar-05 Bill FIRM’S Broker A/c By Investment A/c - Purchase 3,184,788.95 7-Mar-05 Bill Investment A/c To FIRM’S Broker A/c 310,680.68 7-Mar-05 Bill FIRM’S Broker A/c By Investment A/c - Purchase 310,680.68 8-Mar-05 Bank Recpt Bank Book To NBFC A/c 3,184,788.95 8-Mar-05 Bank Recpt NBFC A/c By Bank A/c 3,184,788.95 8-Mar-05 Bank Pymt FIRM’S Broker A/c To Bank A/c 3,184,788.95 8-Mar-05 Bank Pymt Bank Book By FIRM’S Broker A/c 3,184,788.95 9-Mar-05 Bank Recpt Bank Book To NBFC A/c 310,680.68 9-Mar-05 Bank Recpt NBFC A/c By Bank A/c 310,680.68 9-Mar-05 Bank Pymt FIRM’S Broker A/c To Bank A/c 310,680.68

31

Margin Funding

9-Mar-05 Bank Pymt Bank Book By FIRM’S Broker A/c 310,680.68

11-Mar-05 Bill Investment A/c To FIRM’S Broker A/c 53,723.96

11-Mar-05 Bill FIRM’S Broker A/c By Investment A/c - Purchase 53,723.96 11-Mar-05 Bill FIRM’S Broker A/c To Investment A/c - Sales 273,330.00

11-Mar-05 BillInvestment A/c-collateral By FIRM’S Broker A/c 273,330.00

11-Mar-05 JVInvestment A/c-collateral To P&L on Investments 5,595.00

11-Mar-05 JVProfit & Loss on Investment A/c By Investment A/c- collateral 5,595.00

15-Mar-05 Bank Recpt Bank Book To NBFC A/c 53,723.96 15-Mar-05 Bank Recpt NBFC A/c By Bank A/c 53,723.96 15-Mar-05 Bank Pymt FIRM’S Broker A/c To Bank A/c 53,723.96 15-Mar-05 Bank Pymt Bank Book By FIRM’S Broker A/c 53,723.96 15-Mar-05 Bank Recpt Bank Book To FIRM’S Broker A/c 273,330.00 15-Mar-05 Bank Recpt FIRM’S Broker A/c By Bank A/c 273,330.00 15-Mar-05 Bank Pymt NBFC A/c To Bank A/c 273,330.00 15-Mar-05 Bank Pymt Bank Book By NBFC A/c 273,330.00 16-Mar-05 Bill FIRM’S Broker A/c To Investment A/c - Sales 150,957.94 16-Mar-05 Bill Investment A/c By FIRM’S Broker A/c 150,957.94

16-Mar-05 JVProfit & Loss on Investment A/c To Investment Loss 11,046.11

16-Mar-05 JV Investment A/c By P&L on Investments 11,046.11 18-Mar-05 Bill Investment A/c To FIRM’S Broker A/c 155,600.34 18-Mar-05 Bill FIRM’S Broker A/c By Investment A/c - Purchase 155,600.34 18-Mar-05 Bank Recpt Bank Book To FIRM’S Broker A/c 150,957.94 18-Mar-05 Bank Recpt FIRM’S Broker A/c By Bank A/c 150,957.94 18-Mar-05 Bank Pymt NBFC A/c To Bank A/c 150,957.94 18-Mar-05 Bank Pymt Bank Book By NBFC A/c 150,957.94 18-Mar-05 JV Interest A/c To NBFC A/c 10,167.15 18-Mar-05 JV NBFC A/c By Interest 10,167.15

TOTAL 13,588,338.19 13,588,338.19

Ledger

Party Ledger for: 01/03/2005 To 18/03/2005Voucher

Date VType Particulars Debit Credit Balance

Capital A/c3-Mar-05 Bank Recpt Capital Brought In - 1,485,485.00 (1,485,485.00)

NBFC A/c8-Mar-05 Bank Recpt By Bank A/c 3,184,788.95 (3,184,788.95)





18-Mar-05 JV By Interest A/c 10,167.15 (3,135,072.80)

32

Margin Funding

Firm’s Broker A/c

4-Mar-05 Bill By Investment A/c - Purchase 3,184,788.95

(3,184,788.95)

7-Mar-05 Bill By Investment A/c - Purchase 310,680.68 (3,495,469.63)

8-Mar-05 Bank Pymt To Bank A/c 3,184,788.95 (310,680.68)




15-Mar-05 Bank Pymt To Bank A/c 53,723.96 273,330.00

15-Mar-05 Bank Recpt By Bank A/c 273,330.00 -



18-Mar-05 Bank Recpt By Bank A/c 150,957.94 (155,600.34)

Investment A/c – funded4-Mar-05 Bill To FIRM’S Broker A/c 3,184,788.95 3,184,788.95



16-Mar-05 JV By P&L on Investments 11,046.11 3,538,147.48



Investment A/c – collateral3-Mar-05 Bill To Capital Brought In 1,485,485.00 1,485,485.00


11-Mar-05 JV To P&L-profit on sale of invt. 5,595.00 1,217,750.00

Bank Book3-Mar-05 Bank Recpt To Capital Brought In - -

8-Mar-05 Bank Recpt To NBFC A/c 3,184,788.95 3,184,788.95

8-Mar-05 Bank Pymt By FIRM’S Broker A/c 3,184,788.95 -









Interest A/c18-Mar-05 JV To NBFC A/c 10,167.15 10,167.15

Profit & Loss on Investment A/c16-Mar-05 JV To Investment Loss 11,046.11 11,046.11

11-Mar-05 JV By Invt - Collateral 5,595.00 5,451.11

33

Margin Funding

Trial Balance Debit Credit Capital A/c (1,485,485.00)NBFC A/c (3,135,072.80)Broker A/c (155,600.34) Investment A/c- funded 3,542,789.88 Investment A/c- collateral 1,217,750.00 Bank Book - Interest A/c 10,167.15 P&L 5,451.11 4,620,557.80 (4,620,557.80)

Margin StatementDate Open

Portfolio Value at original Cost

Market value of Portfolio at EOD

MTM P&L for today

Total Available Margin after hair-cut

& MTM

Minimum Margin required

Margin shortfall/Excess ( after hair-cut)

In value In % In % In value In % In value 1 2 3 4=18+19 5=

4/2*1006 7=6*2/100 8=5-6 9=7-4

4-Mar-05 3,184,789 3,168,297 (16,492) 1,023,347 32% 30% 950,489 2% 72,858

7-Mar-05 3,495,470 3,490,814 11,836 1,024,327 29% 30% 1,047,244 -1% (22,918)

11-Mar-05 3,549,194 3,523,087 (21,450) 814,944 23% 30% 1,056,926 -7% (241,982)

16-Mar-05 3,387,190 3,349,658 (22,472) 787,593 24% 30% 1,004,897 -6% (217,304)

18-Mar-05 3,542,790 3,445,037 (60,221) 720,197 21% 30% 1,033,511 -9% (313,314)

21-Mar-05 3,539,964 3,444,737 1,586 718,697 21% 30% 1,033,421 -9% (314,724)

Continued…

Additional Position can be taken for Unutilized Margin

Cash Funding Margin Coverage ( before hair-cut)

Limit Approved

Limit Utilized %

Available Margin in cash

Available Margin in Non-cash

Cumulative MTM

In % In value In % In value 10 12 13 14=

15/2*10015 16 17 18 19 20=2-1

34

Margin Funding

242,860 0 - 47% 1,485,485 15,000,000 21% - 1,039,840 (16,492)

- 0 - 42% 1,469,975 15,000,000 23% - 1,028,983 (4,656)

- 0 (3,495,470) 34% 1,201,500 15,000,000 24% - 841,050 (26,106)

- 0 (3,275,864) 35% 1,178,750 15,000,000 23% - 825,125 (37,532)

- 0 (3,135,073) 34% 1,168,500 15,000,000 24% - 817,950 (97,753)

- 0 34% 1,162,750 15,000,000 24% - 813,925 (95,228)

Conclusion

Margin Trading enables trading by paying only a predetermined percentage of

the total value of securities purchased. Margin Trading acts as a leverage mechanism. It

injects liquidity in the market and provides an avenue of investment. It raises the

purchasing power of the investor and also the possibility to reap substantial profits if one

can predict the market movements.

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Margin Funding

Definitions:

BSE – The Stock Exchange, Mumbai

DP - Depository Participant Beneficiary Account of Client

EOD - End-of-Day

F&O – Futures & Options / Derivatives Segment

HNI – High Networth Individual Clients

MTF – Margin Funding Trades

MTM – Mark-to-Market Margins

NBFC – Non-Banking Finance Company

NSE – National Stock Exchange of India Ltd.

POA – Power of Attorney given by Client to NBFC

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Margin Funding

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Documents

Margin Funding