PremiumMUMBAI: The new 75% norm of trade peak margin by the Securities and Exchange Board of India (Sebi) kicked in today amid brokerage firms' plea to roll back the regulation. This is the third phase of implementing higher margin on day trading.
The higher limit, imposed by Sebi, in order to curb speculative trading, is anticipated to impact intraday volumes.
The peak margin trading will be eventually raised to 100% by September. The market regulator’s new mandate on margin trading was brought to effect last year in a phased manner. Effective March 1, 2021, Sebi had hiked the upfront margin requirement to 50% from 25%.
Under the new system securities lying in clients' demat account cannot be used towards margin payment, instead these need to be pledged with the broker after client authorisation and further re-plegded with clearing corporations and exchanges. The client authorisation is being obtained via one-time password (OTP) and emails. Any shortfall in margin collection will also lead to a penalty for clients and trading members.
Earlier, broking industry body Association of National Exchanges Members of India (Anmi) had urged regulatory authorities to reconsider the proposed 100% levy on day trade peak margins. In a letter to Sebi, Anmi said the proposed margin is 300% of what should have been the actual levy.
“There is a great disconnect between what is being collected from clients and what needs to be collected vis-a-vis the attendant risks arising in intraday trades. Anmi, however, reiterates that they are not against collection of intraday margin levied on clients nor the levy of full margin on the clearing member irrespective of the nature of the trade," it said in a letter to Sebi dated 15 May.
According to Anmi’s data, rate of overnight margins, levied on intraday trades, are almost 3.33 times more than what is warranted based on the risks of the trade. It said that ideal margin based on the attendant risks ideally should not exceed 33.33% of the SPAN (standard portfolio analysis of risk margin).
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