Dear Customers,

On 1st September 2020 SEBI introduced collection of upfront margins before placing trades in the cash segment vide its circular CIR/HO/MIRSD/DOP/CIR/P/2019/139. It meant that brokers now had to collect VaR + ELM (with a minimum of 20% as margin from customers before placing orders i.e. on T day. In case of F&O, Currency and Commodities there was anyway a need to have the SPAN + Exposure margin at the time of placing an order.  

As a step further now, SEBI has introduced Peak margin reporting from 1st December 2020 vide its circular SEBI/HO/MRD2/DCAP/CIR/P/2020/127. This aims to curb the leverage that brokers offer over and above the minimum margin requirement. Clearing corporations will now take snapshots  during the day to check if the customers had the required VaR + ELM (min 20%) margin or SPAN+Exposure for placing orders. This circular is getting implemented in 4 phases where the customer has to maintain at least the below mentioned margins even for intraday trading. 

December 1st – Feb 28th: 25% of minimum 20% margin required on trade value for stocks in cash segment or SPAN +Exposure in derivative segment.

March 1st – May 31st: 50% of minimum 20% margin required on trade value for stocks in cash segment or SPAN +Exposure in derivative segment.

June 1st – Aug 31st: 75% of minimum 20% margin required on trade value for stocks in cash segment or SPAN +Exposure in derivative segment.

September 1st onwards: 100% of minimum 20% margin required on trade value for stocks in cash segment or SPAN +Exposure in derivative segment.

Intraday Trading: For clients trading intraday in NSE cash and BSE cash will not have any impact for now. Intraday exposures will now be restricted to max 20X. As we currently provide exposure less than or equal to 20X, there will be no impact on intraday trading. 

Delivery Sell orders: For Clients selling their holdings, currently we release 100% of Sell value for purchasing any other stock or derivative. From December 1st we will only be able to release 80% of the sell value for that day. It means if you sell a stock worth Rs.1,00,000. Then only 80,000 will be released as margin which can be used to purchase any other stock. From next day i.e. T+1, 100% sell value will be available for trading.

Buying back delivery sell on same day:  Sometimes clients sell their shares as delivery and buy back in market on same day. This was a normal practice but from December 1st this may attract penalty. Let me explain you with example

If you Sell 100 shares of Rs. 1000 each, we will release Rs. 80000 as margin (80% of Rs.1 Lac). If you utilize the proceeds for intraday trading and before market ends you also buy back Rs. 80000 worth of shares, then according to peak margin reporting this will attract penalty as there was no margin available for the intraday trading because the Rs. 80000 worth of shares did not actually get sold. In such scenarios you will have a margin shortfall which will attract a penalty.

Intraday Trading: Maximum intraday exposure in derivative segment will be restricted to 4X. Currently though for most of our customers we provide 4X exposure but for our titanium and ultra trader pack clients we provide 6X exposure in Options segment on expiry days. From December 1st we will be restricting exposure to 4X across all clients and across all segments.

Hedge Margin Trades: Customers today enjoy benefit of margin if the trades are hedged. Going forward if clients square off the hedge position then it is important to square off the leg of the transaction which has higher margin requirement first. If this sequence is not followed, your peak margin requirement may shoot up and if sufficient margin is not available, it may lead to a penalty which has to be borne by you.

 Let me explain with example. You have only Rs.50000 as available margin. Now you buy 1 Lot of NIFTY 13000 CE @ Rs.20 and then sell 1 lot of NIFTY 13200 CE, then margin requirement for 13200 NIFTY CE will only be approx. Rs.25000 – Rs.30000. Now you square off NIFTY 13000 CE, and the margin requirement for NIFTY 13200 CE will increase to Rs.1,35,000. Since you only have Rs.50000 as margin this will lead to a shortfall and attract a penalty.

All customers are required to go through this in detail and take necessary precaution while trading as scenarios mentioned above may attract penalty which will be passed on to you.