Comment on Intraday leverages reduced across the board

Rajendra commented on 04 Jan 2020, 12:27 PM

As per SEBI circular dated Nov 19 2019, the new rules for margin requirement will be applicable form Jan 1 2020 (https://www.sebi.gov.in/legal/circulars/nov-2019/collection-and-reporting-of-margins-by-trading-member-tm-clearing-member-cm-in-cash-segment_45011.html)

“The provisions of paragraph 4.1 of this circular shall come into force with effect from January 01, 2020
and provisions of paragraph 4.2 of this circular shall come into force with effect from April 01, 2020”

Below is the clarification issued by NSE on derivatives segment through circular dated 31st Dec 2019 (https://www1.nseindia.com/content/circulars/INSP43069.zip)

“B. F&O segment
In the F&O segment, it is mandatory for Trading Members to collect initial
margin, net buy premium, delivery margin & exposure margin from
respective clients on an upfront basis. It must be ensured that all upfront
margins are collected in advance of trade. Mark-to-market losses (MTM)
shall be collected from clients by T+1 day.”

As per this clarification by NSE all the products like MIS/BO/CO will be redundant henceforth and traders are required to provide full margin.

The SEBI circular states “4.1.Collection of margins from the clients by TM/CM in cash segment:” but NSE through its circular has clarified it is applicable to Derivatives segment as well. This should be cleared by the SEBI/concerned authorities as it will affect lots of brokers business forcing them to shutdown and loss of jobs and as a consequence affecting liquidity in the market.

https://economictimes.indiatimes.com/markets/stocks/news/intra-day-trade-may-dry-up-as-traders-told-to-pay-full-margin-upfront/articleshow/73077727.cms

@Nitin you were a trader once, what would have been your reaction if SEBI had come up with this rule back then when you were trading with dreams of building a business or anyone with a billion dollar idea of building a discount brokerage company or any other business for that matter through earning in stock market. Would you have taken the risk of building a discount brokerage despite the fact that there is potential risk of retail participation taking a hit with this rule. The 1000+ jobs you created and the initiative of funding of startups through Rainmatter would have been difficult or impossible may be. Please speak for retail investors, you might never know how many risk takers and budding entreprenuers you will be helping.

The FM says India Inc needs to unleash animal spirit to reboot the Indian economy and in contrary they let institutions take these take illogical decisions that kills the entrepreneur spirit among the people, nipping them in bud. Hope better sense prevails among those at the helm.

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