A Fresh Look at Margining in Indian Equity Markets

Abstract

Margins are necessary for a robust capital market. While margins help in mitigating systemic risk, adopting the appropriate margining methodology is a challenge. Since June 2000, when derivatives were introduced in Indian equity markets, Indian clearing corporations have adopted a conservative, risk-averse margining approach. With increasing sophistication of the Indian equity markets it is time to take a fresh look at the margining approach such that liquidity of clearing members and their clients is not unnecessarily tied up to the extent that it adversively affects systemic stability.