Update on Peak Margin Reporting - Phase 4 Begins

Update on Peak Margin Reporting - Phase 4 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 was to be implemented in four phases; details of which are available in our previous announcements which can be accessed by clicking here. 

As per the SEBI guidelines, we are now entering Phase 4 of Peak Margin implementation effective Sept 1st. In Phase 4th and final phase, 100% of the minimum margin of 20% on Intraday trade value for stocks in the cash segment or SPAN +Exposure in the derivative segment, will be required.

Impact of Phase 4  changes on Cash segment (NSE, BSE):

Intraday Trading: 

Intraday exposures will now be restricted to max 5X. Currently, we offer up to 6.6666X on some category of stocks but post-Sept 1 maximum exposure will be restricted to 5X.

Impact of Phase 4 on Derivative Segment (NFO, MCX, Currency):

Intraday Trading: Maximum intraday exposure in the derivative segment will be restricted to 1X. 

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 have to be borne by you.

Happy Trading!