Is it possible that in hedge position where suppose the maximum risk is 7k the margin requirement will be the same amount?
Very true. Even citing the example of US markets where the leverage is systematic. They have access different types of margin account system depending upon their risk appetite and most importantly they have access to FOREX market.
While we poor Indian traders can’t even trade on FOREX due to again some cooked up nonsense by some regulators. Some forex reserve c*** or whatever.
Bottomline is that them rich regulators and government officials are afraid that common people will also start making money and at last have a life. So they try their best to make all such crippling rules to make sure that common man continue to struggle at every aspects of life while them rich regulators/officials make consistent riches from our taxes.
8 Likes
No one complains about Zerodha. We all know that due to the facilities provided by Zerodha and others we common people can access the market with ease and frankly everyone thanks Zerodha for all it have provided.
But everyone is tired and anguished at SEBI. Due to the fact that SEBI always makes such hindrances for the retail trader. Always. Always it tries to make retail traders life more miserable by coming with some crooked nonsense and we end up having to struggle to come up with more funds for trading the usual things that we have been doing for years. Why should an experienced fellow pay for the mistake of some fools. SEBI doesn’t understands this basic thing and because of some morons they put a blanket restrictions on each and everyone. This is what hurts the most to think about that the regulators and officials have no real concerns for retail traders who knows their stuffs.
8 Likes
Is this feasible for brokerage as big as you? In this example, the broker has got its 3x funds blocked compared to its client. So, if what happens when all clients combined futures intraday order for 200 crores. Since you as broker provide ¾ of the margin for intraday, how would you handle this, since Zerodha as around 500-550 crores capital. Would you then use the client’ fund or block any new orders or decrease leverage? Ofcourse this is now not possible but I wanted to know what you have done if status quo continued?
Another thing I want to know is about how US Markets handle execution risk apart from availability of spread itself for trade. If a max loss, an option strategy can lose is 5k, then I have heard that in US only these 5k is blocked? Is it true or how much extra do they block for execution risk. Earlier reports have suggested here in India, SEBI will keep the margin around 15k-20k for the same risk of 5k above. How can the margin be reduced further. Also, how can regulators, fintech and brokers reduce execution risk?
2 Likes
New F&O norms: Brokers to meet Sebi over intra-day margin restrictions
For now, brokerages are bracing for a dip in trading volumes, given that the curbs on leverage trades - effective from January - are likely to hurt transactions in the F&O segment
…business-standard news
3 Likes
SEBI find no fault with fraud rating agency and auditing agency who are directly responsible for lacs of crore of bed loan, fraud of big company but it find fault with small traders who regularly pay all the tax, naver cheated there brokers
9 Likes
In 2017 SEBI prescribes norms for MTF and tells that corporate brokers with net-worth of at least 3 Crore are eligible for providing MTF to their clients along with checks limiting the total exposure of the broker for Margin funding to 50% of net-worth of broker. This was applicable to only equity segment with Initial and maintenance margin at 50% and 40% respectively. It doesn’t prescribe anything for Derivatives segment.
Then in 2019 SEBI says brokers have to collect entire Initial margin upfront specifically mentioning Cash segment and NSE steps in to clarify that it is applicable to both segments. It’s high time SEBI should prescribe rules applicable to both derivatives and cash segment in relation to MTF and clear this confusion in trading community.
Nope!
As per @nithin,
Sebi will reduce “upwards of 60%” but not this much. As there is “execution risk”!!
I think Sebi will do nothing. Bus lollipop degi. Dream for 2-3 years.
And even if given. will reduce say to 80k instead for 1 lakh.
All as puppa SEBI want to protect children retail.
5 Likes
Any views whether STT revenue will get hit since the derivative segment will be the most affected by this SEBI move…
3 Likes
SEBI Handbook, Trading turnover in Indian markets.
6 Likes
Indian markets are structurally much better compared to US thanks to SEBI. Much safer for the end customer. Check this out
The issue in India is that Indian law isn’t very tough on financial crimes, which is changing only recently. So regulators have to put much stricter rules.
Like I have mentioned above, the leverages in the US are lesser than in India. If you are talking about Forex through CFD’s where the broking platform is counter to every trade you take, it is almost like a casino. I think SEBI has done a great job in not allowing such platforms to become popular in India.
About hedged positions requiring lesser margins, I think you’d be pleasantly surprised with the drop in margins which you will see on hedged positions soon. And hopefully 2 to 4 weeks and not years.
4 Likes
I am not really sure how badly it will be affected. I am guessing those want to really do intraday trading aggressively will probably pledge their stock holdings or MF etc to trade for the additional leverage. People who trade futures and don’t have the margin to trade, will mostly likely shift to trading options.
2 Likes
@ Nithin what will be the margin required to buy one lot of crude-oil via cover order after the implementation ? the most important question arising in the minds of all regular day traders of all segments – the new margin requirement for their favorite scrip . Earlier the availability of the answer to this question , earlier they will be able to make further decision accordingly.
Minimum 3 year for risk based margin
Whatever is the NRML margin is what should ideally be required for CO/BO/MIS. Check this. But MCX is yet to put a clarification out on this.
2 Likes
@nithin will this rule affect arbitragers - algos which were bringing certain liquidity in the markets.
Also his would it affect institutional investors and prop trading desk for example will zerodha prop will get affected by this.
MTF is only applicable for equity. Like I have mentioned above, there is no provision for funding F&O positions.
Like I have mentioned in the post above, to get the leverage, someone else has to fund it. Prop/HFT/Algo shops are mostly brokers themselves, so there is no broker to fund them. This wouldn’t affect them. It wouldn’t affect institutions as well, they aren’t really doing any intraday trading with leverage.
It will affect any trader(inlcuding HFT/Algo/Etc) who were using another broker, who might have been providing the leverage.
3 Likes
Yes I understand but there is one confusion which always comes in mind that as you mentioned many times that intraday leverage along with margin shortfall for overnight positions was made good by brokers own funds , but did it involve actual outflow of cash from brokers account to exchange or notional accounting entry in books.What if some very big investor along with others used that leverage , would the broker had been always able to put his funds. I know that zerodha is well capitalised and didn’t give that leverage but other brokers used to give that leverage, how did they maintain themselves able to funds intraday leverage to their clients.
1 Like
I have account with two other brokers who are still giving the leverage ,how they are doing it