To

All Foreign Institutional Investors
Custodians of Securities

Dear Sir/Madam,

SEBI vide its circular SMDRP/Policy/Cir-35/98 dated December 4^th, 1998 had made it mandatory for the brokers to collect margins from clients in all cases where the margin in respect of the client in the settlement, would work out to be more than Rs. 50,000.

2. SEBI vide its press release No. PR 38/2001 dated March 5,2001 on Risk Management Measures had prescribed that:


"No exemptions to be allowed in the applicability of volatility margins to any class of investors. This means that the volatility margin will also be applicable to the positions of financial institutions, foreign institutional investors, banks and mutual funds. "

3. Further, vide press release No. PR 38a/2001 dated March 5, 2001 it was clarified that:


" ...institutions will be required to pay volatility margin at the applicable rate announced by exchanges on their net outstanding sale position at the end of day only and not on buy positions. "

4. It is ,therefore , advised that the stipulations as prescribed in the above press releases are complied with and volatility margins on net outstanding sale position are paid at the end of day to the brokers by Foreign Institutional Investors.
5. A copy of this circular is available at the web page 'Foreign Institutional Investors' on our web site www.sebi.gov.in. The custodians are requested to bring the contents of this circular to the notice of their FII clients.

P.GUPTA
GENERAL MANAGER
E-MAIL pgupta@ sebi.gov.in
WEB SITE: http//www.sebi.gov.in
FAX : 00 91 22 2845776
TEL: 00 91 22 2830614