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Sebi new Peak margin Rule will come on effect from Dec 1 2020.
This rules what we understand will change a lot in speculation trade and Intraday trades.
With is comes into effect, the entire scenario of the Market may completely change the System of the Market in a very phased manner.
What is this Rule at a glance
Cash Market
From Dec 1, 2020, a maximum of 20 times until Feb 2021 margin the Broker can allow to clients for intraday trades.
From March 2021 to may this is up to 10 times.
Seven times from June to August 2021
And a max of 5 times from Sep 2021
These rules will apply for all Cash Trades.
Any deviation of these rules will attract penalty to the Brokers. Till now all the brokers allow you extra upfront margin to take position intraday. Some broker also allows few days holding which in the new system will not allow them to pay for the clients.
Future and options Market
25% of the SPAM+ exposure margin until Feb 2021 margin the Broker can allow to clients for intraday trades.
50% from Mar till May 2021, 75% Jun till Aug 2021 and beyond that full SPAM+ Exposure from Clients need to collect by the brokers.
Analysis of the System
We are now going to analysis this entire System in a very simplified manner with examples.
Cash Market :
Current Scenario
Suppose we take a position in Cover Order or MIS or Bracket order Intraday for a value of 9000000 (Nine Lakhs ) Rs intraday of ABC stock.
As per present System if your Broker allows saying 30 times exposure, so you need to have margin 30000 (Thirty thousand) Only.
Modified Scenario from Dec 1 2020
The same example from Dec 2020 client has to keep margin Rs 45000 until Feb 2021.
Rs 90000 w.e.f. March 2021 to May 2021.
Rs 128571 approx from June 2021 to Aug 2021
Rs 180000 from Sep 2021 onwards clients has to keep in the account for taking an intraday position.
In short, a 9 Lakhs Value position from the current scenario in the cash market intraday required 30000 Rs clients margin.
This margin will move up to 180000 Rs in a phased manner.
Future and options Market (FNO, Currency and Commodity)
Suppose a Contract value 900000 of ABC we want to make Longs or Shorts.
Exchange decided if Clients have to say 200000 Rs in the account, he can take this position for Normal trade.
Current Scenario
For Intraday trades in Bracket Order, MIS or Cover Order if Broker allows five times, so you need to have 40000 in account to take this Contract longs or shorts.
Modified Scenario from Dec 1 2020
From Dec 1, 2020, till Feb 2021 all clients require to have min 50000 Rs in the account .
March to may 2021 Rs 100000 need to have in the account.
Jun 2021 to Aug 150000 Rs need in the account for the same contract.
From Sep 2021 onwards full Rs 200000 margin need to have in the account so in simple words
Say goodbye to Bracket Order, Cover Order and MIS orders after Sep 2021.
How this Rule Will change the Market
- This rules actually will reduce the market volatility as per our analysis and Market will be in the hands of big players.
- From the broker front, a significant loss in the Brokerage the generates now in intraday trades.
- From the point of view of small trades who trade say 200000 rs and trade intraday only an exit door to Market as Market regulators in the mood of reducing the speculations in Market and wants real strength of the Market.
- A lot of Brokers nowadays allowed a considerable margin to all of its clients their business may affect very adversely, and they have to these alternate ways to earn from the market.
- Some brokers even allow their clients to hold positions for a few days if clients have min amount in their accounts. This will not happen in a phased manner, and all clients need to have the full margin as specified by the exchanges, so no rule of any discount broker in between.
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Disclaimer: The views and investment tips expressed by investment experts on Stocktradingfno.com are for educational purposes only. Before taking any investment decisions, consult with your financial advisors.
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