What is special about a member's Base Minimum Capital (BMC) with the exchange?
High volumes bring liquidity but also systemic risk from member defaults. Exchanges ensure both liquidity and guaranteed settlement through: - Capital adequacy: members keep minimum capital and net worth: base minimum capital (BMC), a deposit against which no exposure is allowed, plus additional capital to cover margins. - Margins: upfront deposits by buyers and sellers to cover default risk (for example a 17% margin on a ₹10,000 purchase = ₹1,700). Brokers collect from clients at order; exchanges collect from brokers on execution. - Market-wide circuit breakers: at 10%, 15% and 20% moves in the Sensex or Nifty 50 (whichever is breached first), halting all equity and equity derivatives trading nationwide; the halt length depends on the size and timing of the move; limits are set daily from the previous close. - Price bands: 2%, 5% or 10% for specified securities; none for stocks with derivatives or in derivative indices (but an operating range of 10% to catch erroneous orders); 20% for all others. - Settlement guarantee: the clearing corporation becomes counterparty to every trade (novation), backed by margins and the Core Settlement Guarantee Fund for each segment. - Online monitoring: real-time alerts on abnormal positions or inadequate margins; positions can be cut; unusual news-driven moves are investigated. - Price monitoring: special margins, tighter circuit filters, or moving a stock to the trade-to-trade segment (compulsory delivery). - Inspection of members' books at least once a year.