I understand that from the point of view of margin collection, all intraday products like CO/MIS/BO etc will cease to exist very soon. And that would mean that overnight margins will be the only option available regardless of whether I want to trade intraday or hold the position overnight.
There seems to be yet another caveat called peak margin? Is that separate from the concept above?
Not full, the margins aren’t going to increase straightaway, they will increase in a phased manner. As explained in the above-linked post.
When is this applicable from?
This SEBI circular says that there will be a penalty if trades are allowed without sufficient VAR+ELM or 20% for stocks, and SPAN+Exposure from Dec 1st 2020 even on an intraday basis.
Dec 2020 to Feb 2021 - penalty if margin blocked is less than 25% of VAR+ELM ( or 20% of trade value) for stocks or SPAN+Exposure for F&O. (Max leverage of 5% or 20 times for stocks)
Marc 2021 to May 2021 - penalty if margin blocked less than 50% of minimum margin required. (Max leverage of 10% or 10 times for stocks)
June 2021 to Aug 2021 - penalty if margin blocked less than 75% of minimum margin required. (Max leverage of 15% or around 7 times for stocks)
From Sept 2021 - penalty if margin blocked less than 100% of minimum margin required. (Max leverage of 20% or 5 times).
The above essentially means that in a phased manner the broking industry will move to a structure where intraday leverages offered can’t exceed what is already offered by VAR+ELM (or 20%) for stocks and SPAN+Exposure for F&O by Sep 2021.
So margin for one Lot of Bank NIfty will increase by 25% on Dec 1 and will be that margin for 3 months and From Mar 1 it would increase by another 50% and so on until Sep 1 when it will end when both margin for INtra day and for overnight will be the same amount.
@ShubhS9 Won’t this mean a serious crisis in liquidity which effects even those traders that are well capitalised. For instance an order of 100 lots or thereabouts in nifty could see considerable slippage. And such huge orders will become infeasible in (even very prominent scrips like say reliance)stock fno.
@ShubhS9 Will CO & MIS product types be available for fno from March and even after September? I understand that full margin will be required but those products are also helpful for other reasons. For instance I sometimes go long nifty futures on the daily timeframe using NRML type while going short intraday using CO type so that both positions don’t cancel each other out