By Ruchit Purohit
The Securities and Exchange Board of India (Sebi) on Thursday postponed the implementation of the framework related to segregation and monitoring of collateral at client level to May 2, 2022. The extension of deadline came in following several requests made by stakeholders to the market regulator.
“Sebi has received requests from various stakeholders to further extend the aforesaid timeline. After consideration of the same, it has been decided that provisions of the said circular dated July 20, 2021 (apart from provisions of Paragraphs 4 and 5) shall come into force with effect from May 02, 2022,” the regulator said after market hours.
In July 2021, Sebi had released a circular asking for a margin requirement of 50% from futures and options traders to reduce risks into the system.
The rule came in after a reported misuse of client collateral by trading members and the Karvy Stockbroking scam, where clients’ shares had been pledged illegally as collateral against a loan.
Market experts welcomed the extension of deadline, as more time would help all intermediaries to gear up well for the new margin rules. “Since this has a lot of changes in technology and operational processes envisaged, more time will help all intermediaries and MIIs to gear up well. Also, certain clarifications on it are expected which can now come and can be implemented,” Ashish Rathi, whole time director, HDFC Securities, told FE.
He further added that the reasons for the postponement of the deadline were multiple as clearing corporations readiness in terms of implementation of the same wasn’t clear. Similarly, brokers’ back and front office vendors were not fully ready.
“Some clarifications from Clearing Corporations were also pending,” added Ashish Rathi.
The new margin rules have witnessed an extension of the deadline twice so far. Originally, the rule was to be implemented on December 1, 2021, which was later postponed to February 28, 2022.
However, several brokers across the country had already started collecting 50% of cash margins from derivative traders even when the deadline got extended twice.
