Some Indian stockbrokers are planning to approach the Securities and Exchange Board of India (Sebi) for clarity on how peak margin requirements will be calculated for subsequent cash-market trades post early pay-in (EPI), following the regulator's recent decision to waive additional margins on such transactions, according to three people aware of the development.
“Stockbrokers are planning to approach Sebi so that the regulator can specify how peak margin would be calculated under the new rules. However, not all brokers would be part of this,” said the first of the three people cited earlier, all speaking on condition of anonymity.
In a circular dated 22 October, Sebi eased margin requirements for trades made using proceeds from shares sold through the EPI mechanism. EPI allows investors to transfer shares to the clearing corporation before the usual settlement deadline. Once the transfer request is accepted, the value of the shares can be considered towards meeting specified margin requirements.
Peak margin is the highest margin requirement recorded across multiple snapshots of a client’s positions taken during the trading day. It is used to ensure that brokers collect sufficient margins from clients to cover the risk of their open positions. Stock exchanges and clearing corporations oversee the framework, while brokers are responsible for collecting the required margin from clients.
Under the revised rules, clearing corporations will not collect additional margins from trading or clearing members on a client’s subsequent buy or sell positions, up to the value of the accepted EPI. The eligible amount will be the lower of the EPI value and the value of the shares sold.