INSUBCONTINENT EXCLUSIVE:
margins before executing even intraday trades, a move brokers said would have hit transaction volumes and made business unviable for many
D-Street intermediaries.
So, instead of its earlier proposal, the Securities and Exchange Board of India (Sebi) could now allow brokers to
squaring off their positions on the same day pay only a tiny fraction of the upfront money needed to initiate a trade
Earlier this year, exchanges had asked brokers to mandatorily collect the initial margin upfront even for transactions that are not carried
traders to take far bigger stock bets than they could otherwise afford.
Intra-day trading contributes at least 50 per cent of most stock
Many trades are made without the clients bringing in any money upfront.
BCCLAggrieved brokers had met officials from Sebi and the two
exchanges after the executive order, seeking relaxation of the amended marginmoney rules
The regulator had agreed to reconsider the decision after brokers brought to its notice the likely impact of the move on trading volumes,
queries to Sebi, NSE and BSE remained unanswered.
The regulator is evaluating a proposal that would allow brokers to fund 80 per cent of the
upfront margins even for intraday trades, said one of the two people familiar with the matter
This means clients would have to bring in 20 per cent of the initial money
brought in if they agreed to square off the positions before trading ended for the day in Mumbai.
For instance, the value of one lot of
Nifty futures is about Rs 9.08 lakh
The exchange-mandated initial margin to buy one lot of Nifty futures is about 11 per cent, which is about Rs 1 lakh
Intraday products by brokerages allow traders to buy the contract for as low as Rs 20,000, which is just 20 per cent of the initial
margin.
Brokers allowed clients to take intraday bets as these are considered less risky
Intraday products were in a sort of regulatory twilight zone: Brokers were not required to report these trades to exchanges, as traders had
to square off the positions before the end of the trading day in Mumbai.
Brokers are required, however, to pay a penalty if the initial
margins have not been paid for trades that have been carried forward to the next trading day.
