The Securities and Exchange Board of India (Sebi) has relaxed margin rules for investors who use proceeds from share sales to buy other stocks on the same day. The new rules aim to reduce brokers’ upfront funding burden when investors use proceeds from shares sold through the early pay-in (EPI) mechanism.
Mint explains the changes and whether they will benefit brokers.
In a circular issued on 22 October, India’s market regulator 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 clearing corporation accepts the transfer request, the value of those shares can be considered for meeting certain margin requirements.
Under the new 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 or the value of the shares sold. If an investor closes the original sale position, the EPI benefit will be withdrawn. Any resulting margin shortfall can then be blocked from the broker's own collateral. The new rules will take effect on 22 February 2027, four months after the circular was issued.