Starting August 1, 2024, the National Clearing Corporation (NCL) will be making changes to the criteria based on which securities are approved for pledging. As per the new criteria, NCL will accept equity securities as collateral only if they meet the following criteria:
Impact cost of up to 0.1% for an order value of Rs. 1 lakhs.
Traded on at least 99% of days over the past 6 months.
Equity securities that do not meet this criteria will not be accepted for pledging from August 1, 2024. NSE has provided a tentative list of securities that are currently allowed for pledging but do not meet the new criteria in the Annexure of this circular. The final list will be published in the monthly circular of approved securities.
Will I stop getting margin against securities that do not meet the criteria?
No, NCL will continue providing margins against these securities but will increase the haircut in a phased manner over the next few months starting 1st August, so the impact is minimal.
The haircut for these securities will be as follows:
Month
Applicable haircut
From August 01, 2024
40% or VAR whichever is higher
From September 01, 2024
60% or VAR whichever is higher
From October 01, 2024
80% or VAR whichever is higher
From November 01, 2024
100%
NCL has also made changes in haircuts for mutual funds. These changes are as follows:
Units of growth plans in overnight mutual fund schemes will have a 5% haircut.
Units of mutual fund schemes (excluding overnight mutual fund schemes, liquid mutual fund schemes, or government securities mutual fund schemes) will have a haircut based on VaR Margin at 6Ď, with a minimum of 9%
As if the potential banning of weekly options wasnât enough, this is another bad news.
5 of my scrips are in this list, including Bharat Bond 2033, which Iâd planned to keep till maturity. Now, would have to consider selling all of them.
Then you also have haircut of Mutual Funds being increased. Lot of the Equity Mutual Funds have haircut of 7.5%, which will now be moreâŚ
Same here, I have large holding of MOGSEC, which is basically variety of Gsec holdings in ETF format. The liquidity of MOGSEC is low, which doesnât matter if you hold it for a very long period, but now I will need to liquidate it. Any suggestion what to buy which doesnât suffer from the same issue down the line?
G-Secs used to be a good option for the Cash component part, but after they removed some long-dated securities out of nowhere earlier in the year, I donât bother with them anymore.
Having said that, if youâre planning it for the long-term, maybe you could look at Gilt ETFs and Gilt Mutual Funds. But who knows, in the âinterest of the retailersâ, they might remove those too in the futureâŚ
Also, maybe diversify it across different AMCs, so that impact cost can be minimised.
Yeah, such a stringent impact cost rule does not make sense at all. That is what the % haircut is for. 10% is more than enough for these ETFs, but even otherwise they could have increased it to 12-15% instead of removing them totally. I guess NSE will also earn their commission from the forced churn of these securities, so SEBI should monitor if these rules make sense or not.
What do they mean by this? How does the NCL calculate the impact cost for Mutual Funds? How do you come up with impact costs on NAV w.r.t. order value?
Whatâs the bigger purpose behind this? Are they planning to phase out pledging gradually?
Can you share how many stocks were available to pledge before this change, and how many after? So by how much the list has reduced down to and from how much?
On the page Console â Zerodha I can see some stocks with 0% haircut. Howâs that possible?
Doing F&O by pledging stocks is making lesser and lesser sense. I am planning to move to Mutual Funds. Are there any other ways of handling this change?
Those holding Axis MidCap Fund.
In coin it is listed as âAxis Midcap fundâ and in approved list it is listed as âAxis mid capâ . There is a space between mid and cap in the approved list. So, donât assume that this fund is not part of the approved list.
The pledge page is buggy. It shows incorrect haircut values. The âprocessingâ and âoverdueâ statuses are wrong most of the time.
It should also show how much margin is being provided for each security, currently only visible in margin statement. So separate analysis is required in excel to see whatâs exactly going on with pledged margins.
Also, sometimes I buy a stock which shows a 20% haircut in approved list page. But on pledging, it doesnât show up in the list as a pledgeable security.
