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Even markets are open for trade, many equity and commodity market brokers have restricted trading for retail investors across the country in the wake of nationwide lock-down by the government due to COVID-19. Today being a bank holiday, no broker will be able to deposit client cheques and not all retail investors use online cash transfers for ‘high value’ transactions. Thursday being monthly derivative expiry there is fear of spike in volatility and increase in mark to market margin calls. Brokers are also not accepting stocks as margin to trade and clients too do not have much room to pledge them due to huge erosion on value.
Brokers have sent out messages to their clients saying that they will not be carrying out futures and options trades or carry forward positions in this segment to next month. Brokers have told their clients that they are working on skeletal staff strength and even back-office operations have suffered.
Derivative trading requires strict risk mitigations at the brokers end and they have to meet margin compliance of stock exchange clearing houses at all the time. Since the markets are highly volatile, the margin requirements keep changing often during the day. For this reason, some brokers are also demanding more than 100 per cent margin to trade in derivatives from clients. Usual requirement as specified by SEBI is between 30-40 per cent but if their is a market to market loss on the position, it becomes mad rush for the brokers to arrange more cash margin, a Mumbai based MD of a brokerage firm said. Although systems are automated it still requires shifting of trading terminals for which exchanges need to be intimated and follow-up on margin collection, which requires some back-office staff.
Brokers whom Business Line spoke to said they were still allowing normal buy and sell activity on condition that their was credit available in the client accounts.Buying stocks is now being limited to the amount of money that client has already deposited with the broker.
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