SEBI has change introduced new margin policy for Intraday Margin effective from Jan 1st, 2020. With the new changes SPAN + Exposure for F&O and VaR + ELM for equity, has to be collected upfront before taking a trade. This is now compulsory for Intraday Trade (MIS, BO, and CO).
In the past Intraday products were offered with additional leverage by the entire broking industry. This has to stop going f/w.
Let’s take an example – To buy one lot of NIFTY futures, you need the entire SPAN + Exposure margin which is 11.5% approx Rs 1.04 lakhs to take a trade. In past broker was offering additional margin for intraday trades (MIS, CO, BO) with up to 33x margin. So now that will be restricted to SPAN + Exposure across the board. No broker can give you extra margin as per SEBI new guidelines.
With these changes, all brokerage firms need to collect upfront margin from clients account described by the exchange. In such a case, now you need an entire margin (SPAN + Exposure in case of F&O and VaR + ELM in case of equity) upfront in your trading account. This will reduce the number of trades which you were taking in past, but this will reduce your risk in case the bid goes against your call. No changes in equity delivery Segment.
Before SEBI's current circular, brokers were offering higher margins for MIS, CO, and BO. As this trade square off by End of the day, the broker need not to report to exchange for such margin and settle the same by end of day. With this clarification, it is now black and white. No broker will be able to offer any additional intraday leverage on F&O and Intraday trade.
The brokerage firms, who offer higher leverage for intraday trade is going to restrict their clients with exchange required margin. For stock brokers, this has a positive and negative reaction. For the short term, this is going to be a pain as a number of trades are going to be reduced, but in a positive points in terms of risk management. In general word, SEBI made it clear, clients should not take higher positions – Higher the leverage, higher the chance of panic when trades go against you and higher the offs of losing.
Discount brokers like Zerodha, Upstox, Samco, 5pasia – who were offering up to 33x margin with MIS, CO and BO, now going to offer SPAN + Exposure for F&O, and VaR + ELM for equity.
Full-service brokers (Brick & Mortar brokers) like sharekhan, Angel broking, India Bulls, Edelweiss, Geojit who has branch offices/sub broker offices and allowing the trades without collecting full margin upfront, now need to collect exchange required margin upfront in clients account.
Last updated on 2nd Jan 2020