Margin obligation: Market participants ask Sebi for more time

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September 1, 2020 5:30 AM

So far, the markets regulator did not have any margin requirement for cash market transactions but now clients will have to cough up 20% for such trades. This will be applicable to buying and selling of securities.

Markets regulator did not have any margin requirement for cash market transactions but now clients will have to cough up 20% for such trades.

Market participants met with the Securities & Exchange Board of India (Sebi) on Monday seeking more time to im-plement the new rules on margin obligations that are set to kick in from September 1. FE has learned that the regulator is unlikely to concede to the demand, as enough time has been given already. Sebi had said last year brokers would need to collect an upfront 20% margin for cash market transactions. The regulator also came up with a new set of guidelines on how clients could use existing securities in their account to fund their margin requirements. Market participants have been seeking a deferral of both the imposition of 20% margins on cash market transactions and implementation of the new pledging norms.

So far, the markets regulator did not have any margin requirement for cash market transactions but now clients will have to cough up 20% for such trades. This will be applicable to buying and selling of securities.

Most large broking firms have the technological capability to implement the complex new pledging mechanism, whereby a client would have to create pledges for every security separately depending on the need for margin funding. Ashish Rathi, wholetime director, HDFC Securities, says the regulator wants to discourage speculation in the cash market, which is why it has imposed upfront margins on cash market transactions. “We don’t see an issue in implementing the new pledge mechanism, however, more time was needed for the same.”

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