Sooner or later those traders will blow their account by buying options…So again sebi should ban retailers from buying options?
Is there any chance that SEBI will retract or make adjustments to this move if you guys try to tell them the serious implication of this move on volume and future of retail traders.
By the looks of it, it seems SEBI has already taken into account the pleads and hence their decision to implement in phases.
But still think they are rushing it. Is there any hope? Can we at least delay this for couple of years?
Buying options for profit is different from hedging. Traders cant make a living by purchasing insurance policies. Insurance is to support us monetarily in times of black swan events. If traders understand this they wont be able to blow their account by option buying
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Higher leverage is bad but i think no leverage is equally bad…
So brokers have to shift their back end processes, where they can do early payin on the same trading day (debit shares from your demat and give to exchanges on same day). Once this is done, you can use the entire credit from selling shares to buy more. But we are all still waiting for clarity on this.
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We are the largest retail brokerage firm in India, so this affects us more than anyone else in terms of revenue. I have been part of the association of brokers who have been requesting SEBI to reconsider this for many months now. But the broking industry doesn’t have a great standing in front of SEBI thanks to the 4 odd frauds in the last 2 to 3 years.
Especially those at Karvy (which was one of the most reputed brokerage firms) and BMA. There have been forensic audits where SEBI has found bad practices at brokerage firms which maybe led to financial stress and hence the frauds. SEBI has quickly tried to fill in all the gaps. Some of the recent regulations - margin funding can be done only through brokers own capital, unpaid securities from margin funding can’t be kept in broker pool account, when clients pledge securities have to lie in client account, weekly reporting of client funds, upfront margin requirement for stocks, etc. One of the issues here was also some of these brokers using one client funds to fund another customer with almost unlimited amounts of leverage, turning into a systemic risk. A large customer losing a lot more money than he had, causing a small broker to shut shop, in the process hurting all other customers as well. So it was just a matter of time that this regulation came about. The request industry had, was to allow brokers to fund intraday to the extent of their own capital, but SEBI has not allowed that as well. I am sure the broker associations will represent this again, but let us see how it goes.
My view on this has been the same. Brokers should maybe have been allowed to fund atleast till the extent of their own capital.
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Sir After Dec 2021 Will Intraday Will Be 4.5 times or not ?? pls reply sir
Please read above replies, Nithin has answered multiple times.
Why dont zerodha consider enabling BRACKET orders to limit risk for FNO intraday naked positions and also allow naked positions to be more safe + this will help broker revenue + margin requirements upto some extend despite this move from SEBI. Could you educate us?
Hi Nitin,
just want to know if the pledges liquid bees/share could still be used for the margin or even that will go away?
Thanks
Exchanges don’t recognize bracket or cover orders. Margin requirement is based on the position you take, bracket order doesn’t change that at exchanges (it just changes internally at the broker)
That will stay of course. The good news is that in the new pledging process going live from Aug 1st, the shares will continue to remain in your demat after pledging. We will put a post on this soon.
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thanks Nithin for explaining. So it mean that, in future, cover order and potentially Bracker order as well, zerodha wont be allowed to provide reduced margin based on SL, TP ? Thanks !
adding to @browns question.
Only MIS will be allowed for intraday? i.e CO/BO will not be available?
CO, BO will be available just that there won’t be any additional leverage.
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Hi Nitin,
Currently we get margin benefit for intraday short strangle and overnight margin is different for same short strangle. Does this mean going fwd we will same margin or intraday margin will be same as today for this
@nithin, @siva:
The circular is understood.
Can you please share how is this going to be implemented at Zerodha.
At Zerodha, will the implementation be phase wise as per the timelines in the circular or will you stop providing intraday leverage from 1st Dec 2020 itself.
I understand this needs to be thought out at your end as well, so there is no hurry, please reply at your convenience.
After this Covid Situation Volatile, will this VAR+ELM % will come down?
Any chance of reducing lot size in F&O?
Yes, please represent this again 
not asking for 10-20x but atleast 2-3x MIS leverage for FnO should stay
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Not sure why you are so confused, max leverage is as per that circular irrespective of product type.
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