No additional intraday leverages from Aug 2021 in Indian capital markets

[nithin]

@Default

How about brokers lending money for clients at .05% a day to compensate for the lost leverage in FnO? feasible?

Brokers aren’t allowed to lend any money to customers for intraday F&O or Equity trading. This is what the circular is about.

[nithin]

@Anil_Rao

is SPAN+Exposure / VAR+ELM is equivalent of total contract value / Cash Value?
Do we get any margin benefit post Aug’21?

1. Yeah.
2. Margin benefit for what?

[Anil_Rao]

ok so we will need 1.46 lakhs instead 10k to trade MIS, correct?

[nithin]

@anc2015

Hi Nithin,

If I understood you correctly then whatever the Zerodha Margin calculator shows as “Total margin required” under NRML for trading naked Futures will be required for both Intraday as well as swing trading…is that correct?

Yep, you are right.

[Om_Pattanaik]

This new circular with heavily affect the volumes in futures segment especially. right @nithin?

[manas111]

@nithin request you guys to continue the existing lvg till dec and not jump the gun

[Gaurav2k]

what about the new margin framework for option hedging which started from June 2020? will it increase as well? Will the margin increase for Iron condor and strangles?

[ShubhS9]

@Anil_Rao

ok so we will need 1.46 lakhs instead 10k to trade MIS, correct?

Yes.

[nithin]

@Prakhar_Agrawal

Okay , what do you think will it have effect on capital markets in long run . Will it do good to market or bad or no change.

For the brokerage and exchange business, this isn’t that great. Trades will reduce and hence lower volumes and hence revenue. But, higher leverages are the biggest reason for traders to blow up. So maybe, the number of participants will increase and make up for the volumes.

As CEO of a broking business, I have to be optimistic I guess.

[anc2015]

Ok thanks…what about the recent changes to reduced margin requirements for hedged trades? will there be any new changes to that?

[nithin]

@maddy_Des

Most probably Bank brokers will come up with NBFCs that will “online” grant loan in the morning and will revert it back by 4 pm. It will be given at 0% intrerest rate.

Hmm… We have an NBFC, and I don’t think that can happen.

[Anil_Rao]

So what will be the new margin post Aug’21 for below stock eg?

[HarendraSingh22]

Wow ! This means brokerages will be left with no competitive edge?
Only the best tech will survive then, I guess… Great for tech focused ones !

[nithin]

@Anil_Rao

ok so we will need 1.46 lakhs instead 10k to trade MIS, correct?

Today to trade Nifty fut with MIS, you need 40% of 1.46 lks or around 56k. So From Aug 2021, you will need entire 1.46lks and not 56k.

[nithin]

@Anil_Rao

So what will be the new margin post Aug’21 for below stock eg?

I just explained above with an example didn’t I?

Instead of 11.06%, you will need 22%.

[nithin]

@Gaurav2k

what about the new margin framework for option hedging which started from June 2020? will it increase as well? Will the margin increase for Iron condor and strangles?

No, nothing changes there. You will still need same margins as you need today.

[maddy_Des]

Why not. Your NBFC, your capital, your rates, your will. Somebody will sure come with something. I think unsecured loans to traders from 9:15 to 3:30 will surely come up. But I dont know much about this. Just guessing.

[arv_kk]

Will there be sl % concept in future as well e.g. 20% is the maximum SL in case you place an CO order. Here I am referring option selling/buying SL %

[Anil_Rao]

apologies for asking multiple times, let me clarify where im getting confused.

1. SEBI is saying not to give any margin benefit
2. in above eg you are saying approx 22% margin will be needed

[nithin]

@maddy_Des

Why not. Your NBFC, your capital, your rates, your will. Somebody will sure come with something. I think unsecured loans to traders from 9:15 to 3:30 will surely come up. But I dont know much about this. Just guessing.

If you were an NBFC, would you lend money to someone buying a lottery ticket or walking into a casino, an unsecured one? While not everyone might look at stock markets as casino, many do.

As a broker you could potentially lend because the asset lies with the broker, so you can have stops etc. But NBFC is a different company and can’t square off positions of a customer lying with a separate company. Regulations don’t allow such things.