Stock brokers get relief as SEBI postpones margin rules; allows trade after 20% upfront collection

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Updated: Jul 31, 2020 4:36 PM

Market regulator Securities and Exchange Board of India (SEBI) on Friday postponed the implementation of new norms on upfront margin collection in the cash segment to September this year.

The direct tax authority said that the MoU will facilitate sharing of data and information between SEBI and CBDT on an automatic and regular basis.SEBI has, however, not changed the margin levied by exchange on the broker.

Market regulator Securities and Exchange Board of India (SEBI) on Friday postponed the implementation of new norms on upfront margin collection in the cash segment to September this year. SEBI, in a notification said that if stock brokers collect a minimum 20% upfront margin then a penalty for short collection or non collection of margin shall not be applicable. With the new rule all purchases will need 20% cash to be paid upfront to the broker. SEBI has, however, not changed the margin levied by exchange on the broker.

Earlier the new rules were to kick-in from Monday. So far trading could be done without any margin in the cash segment, with the implementation of the new rule, brokers will have to collect upfront payment of 20% across all securities. Failure to do so by the stock broker will attract a penalty. Stock brokers had said that the new rules would hit volumes as investors were not allowed to buy new stock until the money from the previous sales, that take (t+2 days) reaches their accounts. Presently, selling shares were allowed to buy more shares against that credit. 

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What comes as a breather for the brokers is the decision of SEBI to not charge any penalty till September 1. The Association of National Exchange Members of India (ANMI), had approached the ministry of finance and SEBI to grant relaxations. ANMI had highlighted concerns stemming from the methodology of levying margins on positions. The market regulator said that it has taken the decision in  view  of  the  representations  received from  investors,  TMs/  CMs,  stock  broker associations. Margin is collected in the form of funds or security from investors before executing a trade.

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