To reduce the risk on the financial market and to curb the practice of excessive leverage, SEBI has come up with new margin norms. The major changes that are taking place from Sept 1, 2020, are:
Till now, whenever you pledge your stocks as collateral securities, they move from your Demat account to the broker and in turn to the clearing corporation. But from Sept 1, 2020, the stock will continue to remain in your Demat account and can be directly pledged to the clearing corporation. For this, the broker has to open a separate demat account labeling ‘TMCM – Client Securities Margin Pledge Account’ (TMCM stands for Trading Member Clearing Member). Then the broker can re-pledges these securities in favor of the Clearing Corporation and obtains margins.
Zerodha has kept the process unchanged on a large basis but has added a few more steps in which the client is required to authorize the pledge by entering an OTP on CDSL’s website, just like the TPIN based pre-authorization for selling stocks. The investors will be sent a link on their emails where they need to enter OTP and authorize the pledge. The full process is explained below:
The fee of pledging will remain the same, which means Rs 30 plus GST per pledge. This is because there’s a cost levied by the depository to create the pledge and re-pledge.
Some other bunch of changes taking place after levying new margin policy is:
Sale proceeds from holdings can be used to take new positions
The company will debit shares as soon as you sell them from your demat account and make an early Payin to the exchange on the day it is sold. By this, you can use the full value of sale proceeds from your stock holdings as soon as you exit them to enter new positions in stocks and F&O.
Sale proceeds from T1 holdings
You can sell the T1 holdings (stocks bought the previous day and yet to be credited to your Demat) and use the entire sale proceeds to hold a new position. In F&O, you will be able to use only 60% of the selling value.
Intraday profits can be used for new positions only after settling
Currently, traders can use intraday realized profits for taking new positions on the same trading day. But from now onwards, traders will be able to use it only after 2 days in case of equity/stocks and the next day in case of F&O.
Option sell credit can be used only to buy options on the same trading day
When you will exit option positions, and enter new options, the credit of option premium can be used for only new long/buy option trades on the same trading day and only within the same segment. Traders can use this credit for other types of trades only from the next trading day.
Last updated on 1st Sep 2020