Base Minimum Capital

Margin money buys you the right to hold a position. Base Minimum Capital buys you nothing.

It is a deposit a trading member parks with the exchange and leaves there, to be available if something goes wrong. The member gets no exposure against it — it cannot be used to support a larger book, which is exactly what distinguishes it from every other deposit in the risk framework.

How much depends on the member's risk profile, and the risk profile is defined by two questions: does the member trade for clients, and does it use algorithms?

The scale is set out in Table 4.3 of the workbook, under SEBI circulars MRD/DRMNP/36/2012 and MRD/DRMNP/37/2013:

The rules around the table matter as much as the table:

• The deposit meets contingencies in any segment of the exchange.
• A member registered in more than one segment of the same exchange pays the highest BMC across its segments — not the sum.
• No exposure is granted against the BMC deposit.
• At least 50 per cent must be in cash and cash equivalents.
• For brokers of exchanges without nation-wide trading terminals, the requirement is 40 per cent of the above figures.
• Exchanges may prescribe deposits over and above the SEBI norms, based on their own evaluation of risk.
• An exchange keeps BMC at Rs 1 lakh where average daily turnover is below Rs 1 crore for any three consecutive months.

A broker is registered in the cash segment and the equity derivatives segment of the same nation-wide exchange. It trades both for clients and on its own account, and it does not use algorithms.

Cash segment category      : prop + client, no algo  -> Rs 25 lakh
Derivatives segment        : prop + client, no algo  -> Rs 25 lakh

BMC payable = HIGHEST across segments, not the sum
            = Rs 25 lakh          (not Rs 50 lakh)

Of which cash and cash equivalents, minimum 50%
            = Rs 12.5 lakh
Exposure granted against the deposit
            = NIL

The firm now decides to launch an algorithmic execution desk.

New category  : all brokers with algo  -> Rs 50 lakh
Extra deposit required                 -> Rs 25 lakh
Extra cash component required          -> Rs 12.5 lakh

Rs 25 lakh of additional dead capital, locked up, generating no exposure, before the desk places a single order. If the same firm were a member of a regional exchange without nation-wide terminals, the whole scale would be 40 per cent of these figures — Rs 20 lakh instead of Rs 50 lakh.

Chapter 4 (Risk Management, section 4.1.1.4) reproduces Table 4.3, and it is close to guaranteed that you will be asked to read a category off it. The other standard questions are the highest-not-sum rule for multi-segment members, the 50 per cent cash component, and the statement that no exposure is granted against BMC. Series VII scores 50 per cent to pass with 25 per cent negative marking, so a half-remembered figure here is a genuinely expensive guess — the four amounts are Rs 10, 15, 25 and 50 lakh, and they are worth memorising as a block.

• Highest, not total. Multi-segment membership of the same exchange takes the highest BMC across segments. Adding them up is the designed wrong answer.
• BMC gives no exposure. It is not margin, not liquid net worth, and not a base against which limits are computed. If an option says "exposure is granted up to the BMC", it is wrong.
• Rs 15 lakh is the client-only slab and Rs 10 lakh the prop-only slab — the cheaper one is proprietary. Candidates routinely swap them because client business feels smaller.
• Algo makes it Rs 50 lakh regardless of the mix. "All brokers with algo" is a single slab; it does not matter whether the member is prop-only or client-only.
• The 40 per cent concession is for members of exchanges without nation-wide trading terminals, and the Rs 1 lakh floor applies where average daily turnover is under Rs 1 crore for three consecutive months. Do not mix the two reliefs.
• Exchanges may demand more than SEBI's figures. The table is a minimum, not a ceiling.