InvestorQ : Is it mandatory to collect the Extreme Loss Margins (ELM) from the client?
Bhavika Nehru made post

Is it mandatory to collect the Extreme Loss Margins (ELM) from the client?

Answer
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Purvesh answered.
2 years ago


The broker has the discretion to either collect or not to collect the ELM margins from the client. Unlike the VAR, the ELM is not mandatory, but it can be collected at the discretion of the broker. However, many brokers do collect the margins as a measure of abundant caution. However, it needs to be remembered that SEBI has made it mandatory for these ELM margins to be collected in the derivatives segment from all clients effective June 01st, 2018. ELM margins are also known as Exposure Margins. Let us see how the ELM margins are calculated…
The Extreme Loss Margin (ELM) for any security will be higher of 5%, or 1.5 times the standard deviation of daily logarithmic returns of the security price in the last six months. The Extreme Loss Margin is be collected/ adjusted against the total liquid assets of the member on a real-time basis.