Risk Management Policy

1. Introduction

1. Brief. SEBI has put in place various risk containment measures by introducing a comprehensive risk management framework to address the risks involved in the cash and derivatives market and has also put in place a mechanism for regular monitoring of and penalty for short- collection/non-collection of margins from clients.
2. Objective. MARKETWOLF has implemented this Policy to have a transparent, uniform, consistent, flexible and robust risk management system (RMS) which includes collecting & reporting of margins, limit/exposure setting, monitoring of transactions, closing out of positions, checking and monitoring of risk at various levels and implementation of risk containment policies to protect against client defaults.

2. Margin Policy

1. Cash Segment. ‘Margins’ for this purpose shall mean VaR margin, extreme loss margin (ELM), mark to market margin (MTM), delivery margin, special / additional margin or any other margin as prescribed by SEBI or the exchanges from time to time which shall be collected from clients. Margin shall be collected upfront from the clients before actual trade or in any other case, within ‘T+2’ working days except VaR margins and ELM which must be collected in advance of trade. Upfront margins may be exempted in case of institutional investors carrying out business transactions or in cases where early pay-in of securities is made by clients.
2. Derivatives Segment. ‘Margins’ for this purpose shall mean initial margin, extreme loss margin (ELM), mark to market margin (MTM), delivery margin, special/additional margin or any other margin as prescribed by SEBI or the exchanges from time to time which shall be collected from clients. Margin shall be collected upfront from the clients before actual trade or in any other case, within ‘T+2’ working days except initial margin which must be collected in advance of trade. Upfront margins may be exempted in case of institutional investors carrying out business transactions or in cases where early pay-in of securities is made by clients.
3. MARKETWOLF reserves the right exercisable at its sole discretion to call for a higher percentage of margins from its clients, than stipulated by SEBI or the exchanges from time to time, depending on its risk assessment or surveillance parameters or volatility in the markets.

3. Form of Margin Collection

1. Margin shall be collected from clients in the form of funds and/or collaterals, viz., cash component or non-cash component) which includes any of the following forms, provided they are free & unencumbered, after taking into account their risk management policy and liquidity aspects:
   • consolidated funds balance across all segments and exchanges (including commodities);
   • bank guarantee received towards margin, issued by any approved bank in favour of MARKETWOLF;
   • fixed deposit receipts (FDRs) received towards margin issued by any approved bank and lien marked in favor of MARKETWOLF;
   • securities (including mutual fund, Government securities and Treasury bills) in dematerialized form actively traded on the national exchanges, not declared as illiquid securities by any of such exchanges, with appropriate haircut. Such collateral may be accepted in the form of securities, by way of ‘margin pledge’ created in the Depositary System in accordance with applicable SEBI Regulations;
   • any other such collaterals, as may be specified by the Clearing Corporation from time to time.
2. MARKETWOLF reserves the right to determine acceptance and approval of margin collection in the form of non-cash component on case to case basis. MARKETWOLF reserves the right to determine threshold/apex limit for each form of collateral, ratio of funds, hair-cut etc. solely at its discretion subject to compliance with stipulations set by SEBI or the exchanges from time to time.
3. MARKETWOLF has adequate systems and procedures in place to ensure that client collateral is not used for any purposes other than meeting the respective client’s margin requirements/ pay-ins. MARKETWOLF maintains appropriate records to ensure proper audit trail of use of client collateral.

4. Margin Shortfall Penalty & Reporting

1. As per SEBI regulations, Margin shortfall penalty is applied to positions with insufficient margins. The rules require latest SPAN & Exposure or stock physical delivery margins to be available in client’s derivatives allocation. Margin shortfall can happen due to reasons such as removal of hedge position, increase in margin requirement by exchanges, mark to market losses. Under such a situation, penalty is applied as a percentage of the shortfall amount which is prescribed by the regulations which is deducted by the broker and submitted to exchanges.
2. End of Day Margins & Peak Margins. As per exchange guidelines, Margins has to be collected upfront & reported in all segments, i.e., Equity, Equity derivatives, Currency derivatives and Commodities. MARKETWOLF has to report the margin collected from clients on daily basis to Clearing Corporation. With implementation of the Peak Margin Reporting, MARKETWOLF shall have to report the margin collected from each client, as at End of Day (EOD) and peak margin collected during the day, in the following manner:
   1. EOD margin obligation of the client shall be compared with the respective client margin available with MARKETWOLF at EOD; and
   2. Peak margin obligation of the client, across the snapshots, shall be compared with respective client peak margin available with MARKETWOLF during the day.
3. Higher of the shortfall in collection of the margin obligations at (a) and (b) above, shall be considered for levying of penalty. In case of any shortfall reported, following penalty has been prescribed. MARKETWOLF reserves the right to recover from the client, any penalty levied in case of failure on part of the client to bring in the required margins as prescribed by SEBI or the exchanges for non-collection or short reporting of client’s upfront margins based on consolidated crystallized obligation / MTM losses

   Short/Non-Collection for each Client	Penalty Percentage
   (< Rs. 1 lakh) and (<10% of Applicable Margin)	0.50%
   (>=Rs. 1 lakh) or (>=10% of Applicable Margin)	1.00%
   Short/Non-collection continues for more than 3 consecutive days in a month, beyond 3rd day of shortfall	5% for each day of continued shortfall
   Short/Non-collection continues for more than 5 days in a month, for each day, during the month, beyond 5th day of shortfall	5% for each day

4. MARKETWOLF shall report to the stock exchange on T+5 day, the actual short-collection/ non- collection of all margins from clients.

5. Client Limit/Exposure Setting

1. Exposure/Limits. MARKETWOLF implements ‘Margin’ based Risk Management System (RMS), whereby client’s exposure limits are set based on net cash and funds deposited by the client and collateral available in client’s trading account. Daily limits will be set and updated in RMS software on the basis of available balance/collateral.
2. For trades in Cash segment, Margin is based on the security selected. This is made available in the Trading platform. For trades in Derivative segment, Upfront Margin is based on SPAN + Exposure margin, Additional margin, Delivery Margin and any other margin as stipulated by the exchanges. MARKETWOLF has the absolute discretion to set Margin requirement limits for every trade. Margin requirements are set based on our Risk Management policy and Market conditions. MARKETWOLF reserves the right to block trades in any securities/ contracts, based on risk assessment or Surveillance parameters of MARKETWOLF/Exchanges/Regulator or on PMLA guidelines, though such client position may be within Exchange position limits.

6. Criteria Affecting Client Limits

1. We reserve the right to withdraw the exposure limit of a client at any point of time, without any further notice, if there are any dues/margin shortages in the client’s account or based on market conditions or our risk management perceptions or measures. We reserve the right to impose and vary exposure limits, from time to time, on the orders that clients can place through our trading system (including exposure limits, turnover limits, limits as to the number, value and/or kind of securities in respect of which orders can be placed etc.)
2. We may vary or reduce the limits or impose new limits urgently on the basis of our risk perception and other factors considered relevant including but not limited to limits on account of exchange/SEBI directions/limits (such as broker level/market level limits in securities specific/volume specific exposures etc.). We may not be able to inform the client of such variation, reduction or imposition in advance and we shall not be responsible for such variation, reduction or imposition or client’s inability to route any order through stock broker trading system on account of any such variation, reduction or imposition of limits. Losses, if any on account of such refusal or due to delay caused by such review, shall be borne exclusively by the client alone.
3. No exposure shall be granted to clients when debit balances arise out of client’s failure to pay the required amount and such debit balances continues beyond the 5th trading day, as reckoned from the date of pay-in, except in accordance with margin trading facility provided vide SEBI Circular No. CIR/MRD/DP/54/2017 dated June 13, 2017.
4. Handling of Unpaid Securities. In case of ‘unpaid securities’ (i.e., securities that have not been paid for in full by the clients), such securities shall be transferred to respective client’s demat account followed by creation of an auto-pledge (i.e., without any specific instruction from the client) with the reason “unpaid”, in favor of a separate account titled – ‘Client Unpaid Securities Pledgee Account’ (CUSPA). In case the client does not fulfill its funds obligation, MARKETWOLF shall dispose-off such ‘unpaid securities’ in the market within 5 trading days after pay-out under intimation to the client. Profit/loss on the sale transaction of the unpaid securities, if any, shall be transferred to/adjusted from the respective client account.
5. MARKETWOLF shall have right to sell client’s securities, both unpaid as well as collaterals deposited towards margins, or close out client’s open positions, without giving notice to the client where there is a delay/failure of the client to meet the pay-in obligations and /or there is a failure of the client to bring additional margin to cover the increase in risk in the dynamic market conditions.
6. MARKETWOLF shall have right to close out any intra-day Positions taken by the client after a defined “Cut-off” time (presently, 20 minutes before close of market).

7. Trading Policy for Penny Stocks and Illiquid Stocks

1. Stocks where market price is below or close to par or which are having very less value or where company financials are weak with indicators such as loss, accumulated losses, low sales revenue, low or negative net worth, signs of inactivity are typically classified as penny stocks. We shall also refer to list of securities which are classified as illiquid as per the list notified on a periodic basis by the stock exchanges from time to time and/or based on such internal criteria as we may deem fit. In addition, we may also include other stocks in the list of restricted stocks such as stocks in Z category, Trade to Trade Settlement or TS category, the scrips which are included in the list of illiquid scrips by the exchange/s or any other scrip which we deem fit for the purpose of putting trading restrictions.
2. We reserve the right to identify such penny and/or illiquid stocks and refuse execution of transaction requests or impose trading restrictions in such penny or illiquid stocks or reduce the open market interests of the Client in such securities. Such restrictions may be as to the price, quantity or mode of placement of orders. Accordingly, we reserve the right to disable certain scrips for trading on online trading facility/Authorised Person/branch trading terminals or put quantity or price restrictions while putting trade orders. In case of clients using internet trading facility, they may not find the scrip name or may not be able to place any order in the scrip, if such scrip is one of the restricted scrips. Such restrictions are placed on the trading activities of the client as these stocks are exposed to price rigging and other market manipulative activities. In F&O segment no new position will be permitted in Ban Period securities. Penalties if any due to such transactions if initiated by the client shall be borne by the client solely.
3. MARKETWOLF shall have right to reject the orders placed by clients and/or put circuit breakers to discourage trades getting executed at unrealistic prices from the current market price of the security or prohibit the client from trading in illiquid securities which creates artificial liquidity or manipulates prices or to discourage clients from cross/synchronized trading and MARKETWOLF shall not be liable for any loss arising out of non-acceptance or rejection of the client orders for any such reason.

8. Imposition of Penalty/Delayed Payment Charges

1. Any amounts which are overdue from the clients towards trading or on account of any other reason to MARKETWOLF will be charged with delayed payment charges at the rate up to [2]% per month. MARKETWOLF may impose fines / penalties for any orders / trades / deals / actions of client which are contrary to this agreement / Rights & Obligations rules / regulations/ bye laws of the exchange any other law for the time being in force, at such rates and in such form as it may deem fit.
2. Further where MARKETWOLF has to pay any fine or bear any punishment from any authority in connection with / as a consequence of / in relation to any of the orders / trades / deals / actions of the client, the same shall be borne by the client. Further, MARKETWOLF may restrict the client to trade or take further positions.

9. Voluntary Freezing/Blocking of Online Trading Accounts

1. MARKETWOLF acknowledges the framework established by the Brokers’ Industry Standards Forum, in consultation with the Exchanges, regarding the voluntary freezing/blocking of online trading accounts due to suspicious activities.
2. Clients may request voluntary freezing/blocking of their online trading accounts through various communication modes provided by MARKETWOLF, including email or MARKETWOLF's app/website.
3. MARKETWOLF provides dedicated contact details, including the email ID stoptrade@marketwolf.com, for clients to communicate requests for freezing/blocking online access.
4. MARKETWOLF shall take the following actions on the receipt of request for freezing / blocking of the online access of the trading account of the client, through any modes of communication as provided above.
   1. MARKETWOLF shall validate the client's request and shall issue an acknowledgement as well as freezes/blocks online access while simultaneously cancelling all pending orders within specified timelines as per the following scenarios:

      Scenario	Timelines for issuing acknowledgement as well as freezing / blocking of the online access of the trading account
      Request received during trading hours and within 15 minutes before the start of trading	Within 15 minutes
      Request received after the trading hours and 15 minutes before the start of trading.	Before the start of next trading session

   2. After freezing/blocking the client's trading account, MARKETWOLF shall send a communication to the registered mobile number and email ID of the client, informing them of the action taken. This communication shall also inform the client that all pending orders in their trading account, if any, have been canceled. Additionally, the process of re-enablement for accessing the trading account shall be explained.
   3. MARKETWOLF shall communicate details of any open positions, along with contract expiry information, to the client within one hour from the freezing/blocking of the trading account. This ensures transparency and reduces the risk of unwanted delivery settlement. The time limit for this communication may be reviewed and contracted after six months to enhance investor protection from suspicious activities.
5. MARKETWOLF shall verify requests are received from registered client contact details. If not, a client authentication procedure (2 Factor Authentication) is applied, or any other process prescribed by the Exchanges in consultation with SEBI.
6. MARKETWOLF shall maintain records/logs of requests received, actions taken, and communication sent to clients regarding freezing/blocking of online access.
7. MARKETWOLF is responsible for any trades executed from the time of receipt of a freezing/blocking request until online access is blocked/frozen if there is a failure to meet prescribed timelines.
8. MARKETWOLF shall re-enable online access only after conducting necessary due diligence, including validating the client's request and unfreezing/unblocking online access.

10. Review of Policy & Maintenance of Records

1. This policy may be reviewed as and when there are any changes introduced by any regulatory/statutory authorities or as and when considered necessary on account of business requirements and risk management policy. Compliance Officer shall be responsible for periodic review of this policy.s.

11. Regulatory Framework

12. Other Details