Initial Margin constitutes the margin obligation required to be fulfilled by a member on its outstanding trades in securities so as to provide cover to the Clearing Corporation from the likely risk that may arise due to the future adverse movement of prices of such securities. Initial margins for relatively weaker members are stepped up by 25% to 50% based on the Short-term credit ratings of the members. Initial Margin for particular member may also be stepped up in case of adverse market report or regulatory action etc.
Mark to Market Margin (MTM) constitutes the margin obligation required to be fulfilled by a member to cover the notional loss (i.e. the difference between the current market price and the contracted price of the security) in respect of outstanding trades.