The Securities and Exchange Board of India’s new 100 per cent peak margin norm will come into effect September 1. Currently, investors are required to bring in 75 per cent of the total margin upfront for buying or selling. These margins would apply even to intra-day positions.
“With a view to keeping up pace with the changing market dynamics and to bring efficiency in the risk management framework, a comprehensive review of the margin framework was done in consultation with the Risk Management Review Committee (RMRC) of SEBI,” the market regulator, while introducing the system last year, had said.
Over a year, SEBI has rolled out peak margin system in four phases: first phase was introduced in December 2020 with 25 per cent peak margin; second phase with 50 per cent (April 1), third phase with 75 per cent (June 1) and finally, from September 1. Earlier, margins were collected upfront and calculated on the basis of the end-of-day positions. However, with the norm, exchanges are mandated to randomly select 4 times in the day to take snapshots of all margins, the highest margin of which will become the peak margin.
Penalty will be imposed on stockbrokers if margins collected from traders is less than 100 per cent of trade value in the case of cash market stocks and an additional Span+Exposure for derivatives trade. Association of National Exchanges Members of India had termed SEBI’s new peak margin rule as “unfair” and have been pleading regulator to reconsider the new move.
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