Update on Peak Margin Reporting - Phase 2 Begins

Update on Peak Margin Reporting - Phase 2 Begins

Dear Customers,

As we had informed you earlier that on 1st September 2020 SEBI introduced collection of upfront margins before placing trades in the cash segment. As a step further, SEBI introduced Peak margin reporting from 1st December 2020, which has been implemented in four phases, for the details of which you visit our previous announcement by clicking here. 

As per the SEBI guidelines, we are now entering the Phase 2 of Peak Margin implementation starting March 1st. In the Phase 2 (March 1st – May 31st) 50% of minimum 20% margin will be required on trade value for stocks in cash segment or SPAN +Exposure in derivative segment.

Following this we will have two more phases, the changes under which would be as specified below:

Phase 3:
June 1st – Aug 31st: 75% of minimum 20% margin required on trade value for stocks in cash segment or SPAN +Exposure in derivative segment.

Phase 4:
September 1st onwards: 100% of minimum 20% margin required on trade value for stocks in cash segment or SPAN +Exposure in derivative segment.

Impact of Phase 2 changes on Cash segment (NSE, BSE):

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 10X. Currently we offer upto 20X on some category of stocks but post March 1 maximum exposure will be 10X.

Impact of Phase 2 on Derivative Segment (NFO, MCX, Currency):

Intraday Trading: Maximum intraday exposure in derivative segment will be restricted to 2X. 

Hedge Margin Trades: Customers used to enjoy benefit of margin if the trades are hedged. Now, however, if clients squares 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.50,000 as available margin. Now you buy 1 Lot of NIFTY 13,000 CE @ Rs.20 and then sell 1 lot of NIFTY 13,200 CE, then margin requirement for 13,200 NIFTY CE will only be approx. Rs.25,000 – Rs.30,000. Now you square off NIFTY 13,000 CE, and the margin requirement for NIFTY 13,200 CE will increase to Rs.1,35,000. Since you only have Rs.50,000 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.