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?
Although reduced but leverage in Equities will still be there. So the product types MIS, CO, BO will remain.
Peak Margin requires the customer to have sufficient margins at every point during the trading day and not just on an end of day basis.
This has been explained in detail here, request you to go through this post.
Current Intra day margin for Buying one lot of Bank NIfty is 36000 rupees. For Overnight is 1,55,000. So how much will be the margin from Dec 1 on wards. Will it be the full amount or ???
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.
This is how it will be:
Say SPAN + Exposure margin is 150,000
From December to February brokers will have to block minimum 25% of SPAN + Exposure, ie. 37,500.
From March to May brokers will have to block minimum 50% of SPAN + Exposure, ie. 75,000
From June to August brokers will have to block minimum 75% of SPAN + Exposure, ie. 112,500.
From September 2021 brokers will have to collect full SPAN + Exposure margin, so F&O margins will be same for Intraday and Overnight positions from Sep 2021.
So Intra day Margin for Bank Nifty ( with slight difference ) will be the same for Zerodha that we are getting now until the 50% hit in March !
Right, margin requirement should more or less remain the same as current requirement until March.
@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.
To not have any sudden impact on volumes and liquidity, think this is why SEBI has planned a phased increase. What effect it has on volumes and liquidity, we will only know when rules are in effect.
@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