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Stock brokers are up in arms against market regulator SEBI’s new margin norms in the cash market that kick-in from August 1 even as another set of slab-wise rules would take effect from December.
Brokers association ANMI has already taken up the matter with the Finance Ministry and even asked some of its large members to write individually to SEBI, sources said. Brokers say that their software is not yet ready for the new norms.
In the cash market, traders and investors will have to maintain 100 per cent upfront margin to buy or sell stocks from August 1. That means, nil or short collection of margin will attract penalty. This rule will coincide with ‘non-considering power of attorney (PoA) for collection of margin,’ which is also being implemented from the same date.
On an average, cash equities witness trades in excess of ₹30,000 crore daily and retail investors largely do not pay any upfront margin for this. From August 1 that would change as money will have to be paid in advance to brokers to not only buy but even sell shares.
No default so far
“In 30 years, no major default has occurred in the cash market. Brokers are using their own funds so the margin amount they collect from clients should be left to them. Free markets suffer due to draconian rules. New margin norms from August and enhanced rules from December pose a great danger to volumes, liquidity and the long term viability of Indian markets as they are unprecedented and unique in the world,” said Rajesh Baheti, MD, Crosseas Capital, in a note he wrote to the regulator.
Baheti is also strongly opposing SEBI’s peak rate of margin collection that will set in from December. “India has Six-Sigma, toughest, margin norms in derivatives. The peak rate of margin collection will kill trading,” he said.
“We fear operational disruption and difficulties for both the intermediary community and the investors/ traders,” a note from BSE Brokers Forum said with regard to norms that kick in from August. The forum has suggested brokers to seek the regulators’ approval for treating PoA for margin collection, no levy or penalty for non or short collection of upfront margin in the cash segment and allowing stocks as margin fund that too only by way of a pledge.
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