The group examined the evidence from the backtesting exercise (Appendix 1) showing that over an eight year period, a margin shortfall (mark to market losses exceeding the initial margin) of more than 3% of the previous day’s mark to market value happens only twice in the case of Nifty and does not happen at all in case of Sensex. The group also took into account the recommendation of the LCGC that the clearing member’s liquid net worth must be at least Rs 50 lacs.

The group recommends that the clearing member’s liquid net worth must satisfy the following Conditions 1 and 2 on a real time basis:

1. Condition 1: Liquid Net Worth shall not be less than Rs 50 lacs at any point of time.
2. Condition 2: The mark to market value of gross open positions at any point of time of all trades cleared through the clearing member shall not exceed 33^1/3 times the members’ liquid networth.