3.1 Mandating a Margin Methodology not Specific Margins

The LCGC recommended that margins in the derivatives markets would be based on a 99% Value at Risk (VAR) approach. The group discussed ways of operationalizing this recommendation keeping in mind the issues relating to estimation of volatility discussed in 2.1 above. It is decided that SEBI should authorise the use of a particular VAR estimation methodology but should not mandate a specific minimum margin level.

The specific recommendations of the group are as follows: