I was just going through how the margins are calculated and after much reading, I have learnt that the minimum margin requirement for Group 1 scrips should technically be 12.5% but some of the scrips have their margin being charged well under 12.5%, like around 8-ish percent. So what’s the reason behind this? Has the upfront margin requirement rule not started yet or what?
@nithin @siva @ShubhS9 someone plz reply I am asking a very relevant question and everyone needs to be clarified on this.
Margin is based on leverage that is offered in particular scrip.
From December 1st, the margins will gradually start to increase in phased manner, post August 2021, maximum leverage that can be offered in cash segment will be up to 5x.
Is the formula for calculating margin itself gonna change? Because by the current formula as stated here -
The minimum margin requirement is 12.5% for Group 1 stocks with 7.5% being the minimum var margin and 5% being the minimum elm.
Of course the actual margin could be higher for such stocks, but when you say that only upto 5x leverage will provided, you are kinda also implying that the minimum margin requirement itself is going to change to 20%, which very much would be detrimental to the market and its participants. So, the formula itself is gonna change or what? Cause from what I have read, the margins are being required to be collected on an upfront basis which in turn will standardize the leverage across the market but nothing that I have read stated that the formula is gonna change or anything. Plz clarify.
You can read the Intraday Leverage part in this post.
As per SEBI minium VAR + ELM or 20% of the trade value has to be collected upfront before the trade.