Sebi said on Thursday that clearing corporations will not collect margins from trading members on subsequent buy or sell positions in the cash segment. This relief applies up to the value of securities for which early pay-in has been accepted. The move aims to help clients trade more efficiently.
Synopsis
The Securities and Exchange Board of India (Sebi) has announced a new directive that eases margin requirements for clients with a net sell obligation. This policy is particularly applicable when early pay-in requests are accepted by the clearing corporation, allowing clients to execute trades more efficiently. No margin will be collected on future trades up to the value of accepted early pay-in securities.
Market regulator Sebi on Thursday said that clearing corporations will not collect margins from trading and clearing members on clients' subsequent buy or sell positions in the cash segment, up to the value of securities for which early pay-in (EPI) has been successfully accepted.
The decision aims to provide margin relief to clients who have a net sell obligation in a settlement and have completed the EPI process through the clearing corporation.
"It is decided that where a client has a net sell obligation in a settlement, and the EPI request for the sold securities has been successfully accepted by the CC, the CC shall, on a real-time basis, not collect margin from the Trading Member (TM)/ Clearing Member (CM) on the subsequent buy/sell positions of the client, up to the amount of such accepted EPI," Sebi said in its circular.
The decision has been taken keeping in account the proposals received from the Broker ISF, recommendations of the Risk Management Review Committee (RMRC) of Sebi and internal deliberations.
Under the revised framework, clearing corporations will calculate the available EPI value on the trade date, which will be the lower of the value of securities for which EPI has been made and the value of securities sold.
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When a client takes a position in the cash segment on the same day based on the EPI benefit, the clearing corporation will assess the client's available margin after reducing the eligible EPI value.
However, if a client squares off the sale position in the securities against which the EPI benefit has been availed, the EPI value will be removed. Sebi said any resulting shortfall in the client's margin will be blocked from the proprietary collateral of the trading member or clearing member.
This condition will not apply to trade-for-trade securities, as those transactions are settled on a gross basis, Sebi added.
Sebi also directed trading members to ensure that their risk management systems allow clients to square off positions against which EPI benefits have been availed, or take fresh positions, only when the requisite client margins are available.
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