Query on New Margin Rules

[nithin]

@Poco

With the new margin rules at the client level, do the brokers need to put up their own margins to enable the clients to trade or is that obsolete now as every client manages his/her margin.

The motive behind this question is that as sub-brokers are still required to put up margins with the member broker.

This is a query from one of the Twitter user.

The concept of broker funding a customer for intraday equity or F&O will exist no more. When I say no more, it will exist until Aug 2021 until when brokers are allowed to give some additional leverage. But this additional leverage is going to slowly reduce from Dec 1st 2020 until Aug 2021.

No additional intraday leverages from Aug 2021 in Indian capital markets

SEBI has just put a clarification on the issue around additional intraday leverages offered by all brokerage firms in India. While they have reiterated that all margins have to be collected before a trade, they have put in a framework and a phased adoption for penalizing non-collection of full margins. So intraday products that offer additional leverage over and above SPAN+Exposure for F&O or VAR+ELM for stocks, will have to stop completely by Aug 2021. Here is the circular. Check this thread t…

The only funding that a broker is now allowed is - MTF or allowing customers to buy for equity delivery with only VAR+ELM, but funding the rest from their own funds. In this case, the broker can charge interest on the money being lent.

Coming to the deposit requirement for sub-brokers or APs- Margin/deposit collected from sub-broker can’t be used to fund a customer’s intraday trades. So that will have to stop going forward. But I think many brokers collect a deposit to also safeguard in terms of risk - that is if an AP/Sub-broker client goes into debit balance, this is recovered from the AP/Subbroker.