Update on Peak Margin Reporting - Phase 3 Begins

Update on Peak Margin Reporting - Phase 3 Begins

Dear Customers,

As we had informed you earlier that on 1st September 2020 SEBI introduced a 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 Phase 3 of Peak Margin implementation starting June 1st. In Phase 3 (June 1st – Aug 31st) 75% of the minimum 20% margin will be required on Intraday trade value for stocks in the cash segment or SPAN +Exposure in the derivative segment.

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

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

Impact of Phase 3 changes on Cash segment (NSE, BSE):

Intraday Trading: Intraday exposures will now be restricted to max 6.6666 X. Currently, we offer up to 10X on some category of stocks but post-June 1 maximum exposure will be 6.6666 X.

Impact of Phase 3 on Derivative Segment (NFO, MCX, Currency):

Intraday Trading: Maximum intraday exposure in the derivative segment will be restricted to 1.3333 X. 

Hedge Margin Trades: Customers used to enjoy the 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 a 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 that has to be borne by you. Let me explain with an example. You have only Rs.50,000 as the 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 a penalty which will be passed on to you.

Happy Trading!