RISK MANAGEMENT & INTERNAL CONTROL POLICY
This document shall be deemed as the official guidelines, policies and procedures to be followed by Open Futures while carrying out its business activities as a member of the National Stock Exchange of India Ltd. The objective of this document is to effectively manage the various risks involved in the business operations which may include default by clients, fraud and infidelity by employees, technological failures, misuse of the trading system for market manipulations apart from protecting the interests of investors and ensuring the effective and timely compliance with various applicable Acts, rules, regulations, bye-laws, circulars and guidelines.
Manner of usage:
This document shall be used as guidelines and reference by the key personnel in charge of the activities namely client identification and introduction, surveillance, record keeping, the personnel in charge of executing and authorizing the day to day transactions, as well as by the business associates who are involved in the activities as mentioned above. The Compliance Officer (CO) shall provide a copy of this document to all such existing as well as new key personnel and business associates from time to time and explain the contents and their responsibilities in this regard.
Risk Management & Internal Controls:
1. Registration of clients: It is the policy of the company to carry client registration in house. KYC procedures as prescribed by SEBI/Stock Exchange are to be strictly followed while ascertaining the identity and verifying the proof of address of the new clients.
Identity proof of banking account and demat account shall be obtained before entering the details of bank and demat account in the client master database.
2. Receiving, validating & entering the orders of clients in the trading platforms: Normally, the new clients shall be assigned and introduced to a specific terminal operator and the operator shall be briefed about client requirements for trading, investments and their risk taking abilities. Accordingly the terminal operator shall, under instruction from the concerned senior
3. Collection and release of payments to clients:
The client shall be asked to make the full payment as per the daily debit obligation on T+1 basis. The pay-out of funds shall be made on T+2 basis after confirming the successful pay-in of securities by the client.
The exchange/segment wise segregated ledger account shall be maintained with an option to view the exchange position. Under written authorization from the client, the pay-out of funds can be retained for margins and/or future pay-in obligation and for collection and release of funds the account shall be maintained on a running account basis with exchange net balance criteria.
4. Collection and maintenance of margins:
The requirement of collection and maintenance of margins in Cash/Capital Market segment is waived. In case of the clients having relatively large volume and regular trading activities, the pay-out of funds and securities shall be retained towards the upfront and daily margins under the written authorization from the clients.
5. Collection and delivery of securities to the clients:
Collection of deliveries of securities from clients shall normally be called from the clients on T+1 basis. In case of delivery pay-in obligations of large quantity/value and/or illiquid scrip shall be called for prior to the execution of sell order or as early as possible after the execution of sell order and shall be tendered to the clearing house under early pay-in mechanism. Deliveries of securities to the clients shall be effected within 24 hours from the pay-out and as far as possible the deliveries shall be given to the clients directly from the clearing house through upload of pay-out break-up files.
In case of the clients who have given written authorization for retention of securities towards margin and/or future pay-in obligations, the pay-out securities of such clients shall be moved and retained in the separate BO account designated ‘Client Margin BO Account’.
6. Monitoring of Branches / Sub-Brokers etc.: Monitoring of all clients shall be carried out centrally from Delhi Office.
7. Operations & Compliance Requirements:
The day to day operations are being looked after by the Compliance Officer. Maintenance of records. The on-line surveillance desk is to be monitored by the Senior Officer where real time client wise/scrip wise position, MTM, margin requirements, available margin and exposure limits for all exchange segments are monitored.
Various types of limits on trading terminals are being set up and updated dynamically during the live market as off-line risk management reports are generated to enable a quick look at the status of any individual account or a group of accounts or for the clients.
The various compliance requirements of the exchange segments shall be ensured by the compliance officers under the supervision of the Senior Officer.
8. Continuity planning/alternate plan in case of disasters etc.:
The Senior Officer shall be in charge of all the Information Technology infrastructure requirements. There shall be sufficient and competent man power to manage the trading system failures during the live market.
There shall be a back-up communication link in addition to the regular link for all the exchange segments and it shall be tested periodically. There shall be a main line power input from two different routes and there shall be sufficient battery back-up through the on-line UPS. Apart from that there shall be a system to quickly switch over to the power back-up through the mobile generator van in case of long power failures. In case of disaster, we can commence the operations from any of our two locations at any time since both locations have online connectivity. Moreover, we shall keep back-up zip, pen drive and cartridges with full data. All our data shall be loaded on our website which includes client transactions, contracts, ledgers, delivery statement etc., so we are well equipped in case of disaster.
9. Closure of client accounts/dormant accounts:
Clients who have not traded for more than 6 months are treated as dormant accounts. Accounts may also be treated as dormant if the concerned officer deems fit. We have one specific form for re – activation of dormant accounts that must be duly filled by the client before trading is recommenced.