Sebi’s resolution to postpone the implementation of the 50% money margin rule for futures and choices merchants till February 28 will assist market individuals modify to the brand new technique of segregation and disruption. surveillance, consultants mentioned Wednesday.
This resolution was welcomed by market individuals as they sought an extension of the deadline attributable to operational points.
The regulator on Tuesday prolonged the deadline till February 28, 2022 for the implementation of the 50% money margin rule for futures and choices merchants. The earlier deadline was December 1, 2021.
“Primarily based on the representations acquired from stakeholders, it was determined that the availability of the earlier round would enter into drive on February 28, 2022, as an alternative of December 1, 2021,” Sebi mentioned.
Paytm Cash CEO Varun Sridhar mentioned it was an excellent transfer from Sebi as it would assist market gamers together with ITNs to check and stabilize the system they’ve developed. for the brand new technique of segregation and surveillance. Educating buyers in regards to the implication of the brand new guidelines might be crucial, and buyers will even be capable of regularly adapt to the brand new necessities, he added.
For transactions within the futures and choices (F&O) section, earlier margin guidelines allowed buyers to completely cowl their margins with their securities.
Nonetheless, from February 28, 2022, Clearing Members might be required to maintain a minimum of 50 % of the entire collateral within the type of money or money equivalents. Clearing Members (CMs) assure the settlement of transactions on the exchanges on behalf of shoppers.
For the aim of monitoring a minimum of 50% of the money equal collateral on the Clearing Member stage, a shopper’s extra money equal collateral won’t be thought of for different shoppers or for the dealing member’s unique accounts. or compensator. Welcoming Sebi’s resolution, Vijay Singhania, Chairman of TradeSmart, mentioned the foremost drawback in implementing the rule is the dearth of pragmatism.
The Sebi round requires the segregation of shopper funds into completely different segments like money, M&O, currencies and many others. and importing them to the clearing firm / PCM. It is virtually not doable, ” he mentioned.
Moreover, he mentioned brokers are supposed to keep up a mixed ledger for all segments of a shopper, and the shopper can commerce in any section primarily based on the mixed ledger steadiness. In equity, there ought to solely be one mixed Consolidated Margin for every buyer as an alternative of breaking it down into segments. Along with funds, the segregation of securities donated by shoppers between completely different segments is a much bigger situation. Segregation of titles by way of shopper pledging and re-engagement from dealer to clearing firm for every section will turn into an enormous train, ” Singhania mentioned.
He additional mentioned that the train could be bigger if the dealer trades by way of clearing members, as a further layer of pledging and re-pledging is elevated. “The place deteriorates after we ask the shopper / investor to additionally keep a most margin. A selected buyer could have a most margin requirement in a single section at one time, whereas they could have a most margin requirement in one other section at one other time throughout the identical day. So whereas he / she has the satisfactory margin, he / she might be penalized for no purpose, ” he added.
Ashish Chaturmohta, director of analysis, Sanctum Wealth, mentioned Sebi made an excellent transfer by shifting the dates to some months later as individuals invested in IPOs, mutual funds, shares and derivatives, and many others. These positions are primarily leveraged positions as a result of presently the markets look very engaging when it comes to return, preserving the risk-reward features in thoughts, he mentioned.
This rule would have hampered buying and selling actions as a number of positions in varied asset courses would witness a large unload. Subsequently, this resolution would give individuals time to handle their enterprise actions, ” he added.
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