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SEBI proposed regulatory changes, Effective 1st Aug
July 23, 2020 at 1:44:30 PM
SEBI proposed regulatory changes, Effective 1st Aug
Margins for capital market segment & pledging of securities.
Greetings,
Sebi has instructed the brokers to enforce 2 new regulations effective from the 1st of Aug 2020, Let’s see how it impacts us:
Regulation 1: To trade in capital market ie. cash segment clients shall be required to maintain initial margins (Required before effecting any trade) with the stock broker , these margins can be in the form of money / shares / fd’s. This is same as the currently prevalent initial margins requirement in F&O segment. In absence of initial margins clients trade will be blocked by dealing softwares.
Let’s take an example: If you want to purchase 50 shares of reliance at the current market price of Rs. 2000 , That is a total value of Rs. 1 Lakhs, you will need to maintain a margin amount of Rs. 22700 with PMsec before placing a buy order on the exchange. The margin requirement for reliance is 22.7% and this can be different for all stocks, You can refer to the “Latest VaR + ELM (%)” on this link : https://www.icclindia.com/riskmgmt/margin.aspx to check the margins applicable on each stock.
Rs. 22,700 quoted in the above example as margin required to buy / sell reliance shares can be held with PMsec in 2 forms:
Maintaining fund balance (Credit Ledger Balance) worth Rs. 22,700.
Using your held stocks as margin, Eg: If you hold Tata Motors shares worth Rs. 50,000 you can use these as margins. (More about this explained below in Regulation 2)
Regulation 2: To use stocks / securities held in Demat account as margins, clients will need to pledge these shares in favour of the stock broker.
Let’s continue the example stated in “Regulation 1” above: If you hold Tata motors shares worth Rs. 50,000 in your Demat a/c & you want to use these shares as initial margins to buy / sell 50 shares of reliance quoted in the previous example, then you’d need to instruct PMsec DP via online platform to pledge tata motors shares for using as margins. Once you’ve placed a pledge request CDSL/NSDL will send an sms to you with a link, you can confirm to pledge the shares by clicking on the link. (This system will only be activated from 1st of Aug). If your trading a/c is held with PMsec but demat is held elsewhere you will have to instruct the other DP to pledge shares for margins in favour of PMsec.