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Collection & Reporting of Margins in the Equity Cash Segment effective from January 1,2020.


Posted on 17-Jan-2020 Comments  0

Dear Valued Client,

Wish you and your family, a Happy & Prosperous New Year 2020!!!

We wish to inform you that, SEBI ( Securities and Exchange of Board of India)  vide Circular dated November 19, 2019, had directed all Brokerage firms to collect upfront margins ( VAR + ELM) in the Equity cash segment, effective from January 1, 2020. Currently there is already a rule in place for collecting and reporting upfront margins (upfront margin is the margin available before the trade) in the derivative segments (Equity, Currency, & Commodity). Now SEBI has mandated to collect upfront margins for the Equity segment to bring uniformity in the upfront margining system across all segments. The margins collected are reported to the exchange daily. If the collected upfront margin is lesser than the exchange stipulated margin, a penalty will be levied as per the prescribed rates as currently being done in derivative segments on the margin shortfall amount with effect from April, 1, 2020 for Equity Cash segment.

What is VAR + ELM margin?

The term VaR (Value at Risk) is the margin intended to cover the largest loss that can be encountered in a stock till the settlement day.  ELM margin covers the expected loss in the situations that goes beyond the envisaged risk.

How does this affect your trading in the Equity Segment?

While it has not been mandated to collect upfront margins until now, but most well run brokerage companies have collected upfront margins in Equity segment. Our Current margining policy for Equity intra-day trades is 10% for all stocks which have derivatives and for Equity Delivery is 50% for all Group 1 stocks where VAR % of stock is less than 20%. This means that we are currently collecting 10% margins for equity intra-day and 50% margins for Equity delivery and as such we don’t need to do anything more to comply to the new SEBI norms. Note that these norms are not applicable for Margin trade funding (MTF) trades as MTF regulations and margins are different. At Tradeplus we have always encouraged clients who require leverage and funding facility to use our MTF product which is seamlessly integrated into our INFINI trading platform.

OUT NRML IN MTF

To safeguard the interest of our clients who have not availed the MTF facility in sizing of their trades and managing risk we will be moving to 100% margining system for equity delivery trades (non MTF) and we would charge 50% of (VAR+ELM) or in other words 50% of exchange margins for Equity intra-day trades like most Online discount brokers do with effect from 21st January 2020. This would imply that NRML margins would be at 100% value of the order in the NOW platform.

Until now we used to give Collateral value for shares held in client demat account with POA. With new regulations on the anvil with respect to POA, this facility would  be dis-continued for NON MTF equity trades MTF is a regulated SEBI product and we have been one of the 1st brokers to get this license from SEBI when other brokers were using the NBFC route. With SEBI coming down hard on the NBFC funding adopted by most brokers, we also want to encourage our clients to use the MTF route where one desires to take delivery on leverage. In fact we have created a completely online MTF system where you can sign up online for MTF instantly and even transfer your DP stocks towards MTF collateral using the online system- all in an instant your MTF account can be ready to trade.

We request you kindly to take note of the proposed changes and trade accordingly. In case if you have any clarification please feel free to contact Tradeplus @  044- 49427576 / 044-28214171 or write to us @support@tradeplusonline.com. Click Here to read the Exchange Circular.

HAPPY TRADING and BEST WISHES FOR 2020

Tradeplus Team

 

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