Officials at NSE said that Sebi had changed the way the volatility margin has to be calculated and had done away with two margins, which was not anticipated by the brokers. This became effective on NSE from Wednesday and on BSE from the current settlement cycle starting Monday.

According to senior officials at NSE, brokers had not paid any heed to the new system of paying and calculating margins which led to the brokers exceeding the trading limits and could not pay the margins. ``This was instrumental in bringing down the market yesterday as operators not being able to pay the margins offloaded their long positions. This led to a selling pressure in some of the highly volatile scrips like Zee Telefilms, and others'', said a fund manager.

As against 60-70 scrips attracting volatility margins yesterday around 170 scrips attracted volatility margins on NSE. In the new system the margins are spread over a larger number of shares.

Officials pointed put that what was seen were a part of the initial teething problems and that the software in the back office had also to be changed. On NSE a number of brokers had already paid up the margins, said a senior NSE official.

``The new margining systems provides a significant relief against the earlier system as in the new system of calculating the volatility margins the margin will be the same throughout the week instead of on a daily basis. So a broker before trading in a volatile scrip will actually know the margin that he has to pay'', said senior exchange official.

Sebi with a view to rationalise, streamline and refine the existing margin system had discontinued with the concentration margin and 90-day special margin.

In case of volatility margin, Sebi felt that the earlier system of calculating volatility margins was over a very short period of one week only. For the purpose of considering volatility over a longer period the formula to compute volatility was changed to take the differnce of six week high and six week low in percentage with the computation being done on the basis of six weekly rolling period. ``This is a major change as the new system has a longer horizon with the margin remaining same for teh whole week as against daily changes. The new system is much better'', said a broker.

In the new system volatility margins would be imposed if volatility computed as above exceeds 40 per cent and will be chargeable in four slabs ranging from 5 per cent to 20 per cent depending on the level of volatility. Volatility margin would not applicable to scrips priced below Rs 40.