Upfront margin plans to hit brokers' intra-day business

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Mumbai, Ta. 12 February 2020, Wednesday

The Securities and Exchange Board of India (SEBI), the regulator of the capital market, has decided to immediately put a proposal on the scheme for a scheme forcing traders to pay full initial margin. Sebi is said to have made the decision following allegations that the scheme would require upfront payment for intra-day trades, affecting transaction volume and making it impossible for many stock market intermediaries to do business.

Thus, Sebi now finds that brokers can now allow part-time financing of their clients' initial margin requirements, instead of their previous proposal. Right now intra-day traders can skewer their positions on the same day by paying a fraction of the upfront money to trade.

Earlier this year, the exchanges asked brokers to raise mandatory initial margin upfront even if the carry-on was not forwarded the day after their transaction. If this proposal had been implemented, brokers would have been deprived of their ability to offer intra-day trading products.

Most shares of intra-day trading account for 5% of the broker's daily transaction volume. Many deals happen even if the customer doesn't bring any money upfront. Brokers angered by Sebi's proposal, the SEBI officials and the two exchange officials, together with the issue, demanded relief in amending the margin money rules. The SEBI agreed to reconsider. In this regard, it has now been decided by the SEBI and the exchanges not to implement the proposal immediately.


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