SEBI vs Wisdom Capital

Industry Insights
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Wisdom capital is upping the ante against SEBI peak margin circular (see linkedin post).

Conservatively the peak margin directive is deemed to be in the interest of market participants. SEBI also has the reputation of having much better market regulation to its peers which makes impossible unusual situations like the GameStop saga in US

Another update from last month:
PMO seeks response from SEBI on Wisdom Capital suggestions/grievance on peak margin circular (prnewswire.com)

Reading the narrative from wisdom capital - there are few questions which come up from a neutral perspective

Below are some statements from above links and some questions:

"There has been no benchmark in the world that prompts such an action from SEBI."
Question: Is SEBI over regulating and limiting the playing field instead of levelling it? Thoughts?

"Without consulting the broking industry stakeholders, SEBI has come up with these guidelines. These are not only unconstitutional - even the timing of the circular is questionable"
Question: Is it really unconstitutional? Is SEBI mandated to consult brokerages before making any rules? Curious to know how many other brokerages support this or they stand divided? Or is Wisdom capital the lone wolf here?

"These steps have deformed the basic fabric of the markets - these are - also against the interests of the retail investors and are more inclined to help the cause of wealthy business participants. The Circular will have a direct impact on the livelihood of many retail traders."

Question: With everything else in place except the peak margin mandate -> is it killing the broking business? With no other revenue stream except brokerage - are the smaller guys doomed? What is wrong if a broker provides margin facility to customers (within regulations). Will it not help them survive by offering something different?

Question: The entire messaging behind this regulation is protection of the ‘retail investor’ and long term health of the Indian capital markets - basically ‘its the right thing to do’ for the long term. Why is Wisdom capital alleging crony capitalism here? Will this regulation scare away retail folks and the new age traders?

There may be lot more than what meets the eye here and many questions come up but would be interesting to have a healthy conversation around this story.

@nithin @siva

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I feel peek margin system is good but don’t understand exposure margin for hedged trade what is the point of charging 50k for max risk of approx 5k SEBI is mad n these old bureaucrats must retire n get lost they took 10 years to investigate Ambani’s case,RJ Apache case was also settled
Could not handle FT CASE

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I don’t think small brokers may survive in long term, I think more consolidation will happen in next few years. Near to zero brokerage rates and it takes money to build team and infrastructure which may force more small brokers to shut down.

Think sebi is in the right direction because earlier brokers are selling leverage as a feature which is absolutely wrong and putting entire system at risk, said that we also want to allow intraday leverage within some limits, killing out complete leverage may be unnecessary move because there is not much risk during the day compare to overnight risk so within certain upper cap limit they should have allowed and thus by creating a levelling field and at same time safeguarding the system.

As mentioned above this rule is brought because few brokers are misusing leverages, few offered 100 to 200 times which is a absolute stupidity. We want to have rule which allows to offer intraday leverage with in some upper limits.

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@siva don’t you think present leverage i.e.50% of overnight is the correct amount of leverage for system?

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Yeah, even 25% is also okay.

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