@ShubhS9@nithin does this means currently SEBI doesn’t has hard rule to maintain 50% margin as cash? If yes, can you please answer followings -
Why Zerodha forces us to maintain 50% cash component? There are many brokers in market who don’t demand this.
What about the penalties which we have been charged for not maintain cash component even though non-cash component margin is available? I doubt SEBI/NSE would have imposed any penalty on us in this case, but Zerodha does. Can @nithin@ShubhS9 throw some light on this?
The 50:50 rule has been existing forever. What the new regulation mandates is that you can’t use one client’s funds to fund another client. Which means every broker has to now mandatorily use their own propreitary funds to fund another customer. While in spirit brokers shouldn’t have used one client’s funds for another, it was not being followed. This is also the reason why brokers would lend money for this purpose without any cost. We have never lent customer funds to another customer, so the funds we lend always came with a cost, which is what we recovered by charging an interest to the customer for the portion that we were funding (it isn’t a penalty, it is an interest cost). With this new regulation, almost all brokers will end up charging interest, since money comes from their own pockets now, unless of course the brokerage charges are high enough to cover for the interest cost.
if this 50:50 rule has been there already, then how come few brokers are able to by-pass this rule? I do have a trading account with an another broker where I have only pledged equity MF and I use entire 100% margin amount for f&o intraday and overnight positions.
Like I said, at the clearing corp this 50:50 rule has always been there. But this, because it is a pooled account, would mean that if one customer had a free cash balance parked and another had only collateral, brokers could use one person’s cash to fund another person. The new rule isn’t 50:50, the new rule is that customer funds at clearing corporation now needs to be segregated. This means brokers can’t use one client’s free fund for another client, which means brokers have to put their own funds. If a broker has to fund it, there is a cost to it, so all brokers will either start charging interest on this (like how we do) or charge higher brokerage charges for derivative trades.
So after feb 28th 2022 also there will no requirement to maintain 50% cash or cash equivalent for intraday trading in FnO? just like now its not required…please clarify it, since other broker already started asking for 50% cash for intraday and that creating big confusion. I’m using Zerodha and other broker for intraday trading and zerodha is only broker currently allowing to trade with 100% collateral money.
Right. For intraday you can utilise 100% of the collateral margin. There won’t be any interest charged. The 50:50 Cash - Collateral requirement is only for overnight positions.
Is there any change for zerodha users?
I have only 30k cash. Remaining 5 lakh is pledged equity. I take overnight positions on 3 lots each side generally. Cash is negative but margin is positive. And I’m happy to pay interest.
Is this going to be stopped?
Was there a further clarification to this circular? I saw another reply of yours from a month ago where you say that you might have to stop funding it with your own money altogether! Did SEBI clarify that 50% cash has to come from the same client and not even from brokers own funds? @nithin
Hi, like the majority I sell options and It is already mentioned in the thread that 50:50 Cash Margin need not to be maintained for Intraday Position and this is for positional option selling only.
Still asking for an update whether this is rule is continuing or there has been changes in 50:50 Cash Margin rule for option selling.
Can I take intraday options selling position with say 25% Cash Collateral and 75% from Equity Mutual Funds. All positions being strictly Intraday only. Will I have to pay interest for intraday position in above scenario.