Derivatives

What are the margin requirements under GSM and ASM?

Akhil Nallamuthu BL Research Bureau | Updated on September 04, 2021

The new margin rules are fully effective from September 1,2021 and that means the intraday margin leeway that the traders had earlier will come to an end. Consequently, the margin requirement for intraday and overnight trades will be the same henceforth. Minimum initial margin for cash segment will be 20 per cent and for derivatives the sum of SPAN (standardised portfolio analysis of risk) and ELM (extreme loss margin) margins.

However, it should be noted that this may not be the maximum margin requirement and it can go up significantly when a security is placed under Graded Surveillance Measure (GSM) and Additional Surveillance Measure (ASM). Notably, these measures existed even before the new peak margin rules. These measures were introduced by market regulator SEBI with two objectives:

1. Alert and advice investors to be extra cautious while dealing in these securities.

2. Advise market participants to carry out necessary due diligence while dealing in these securities.

Based on the predetermined conditions stocks will be placed under these measures and this can result in restrictions like limitation in intraday movement and importantly, higher margin requirements. For instance, 20 per cent margin for a stock under normal circumstances can go to 100 per cent or in some cases to 200 per cent if it falls into surveillance measures. This will be relaxed in stages based on preset conditions.

Send your queries to derivatives@thehindu.co.in

Published on September 04, 2021

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