Investor Alert: SEBI’s new margin rule kicks in

 

Two major regulatory changes have kicked in for Indian stock market investors from Tuesday (September 1), including the method of pledging stocks and upfront margin requirements for stocks and futures and options (F&Os).

Under the Securities and Exchange Board of India’s (SEBI) new margins system, there will be a bunch of changes with respect to margin requirements.

Buying and selling of shares will require an upfront margin from now onwards. So if anyone wants to buy shares worth Rs 1 lakh, they must have Rs 20,000 in their account as cash and the rest of the money is to be paid within 2 days.

The major change is that if anyone wants to sell Rs 1 lakh worth of shares from their holdings, for that scenario also, they must have a minimum of Rs 20,000 in their account, failing which penalties will be levied.

The sale from holdings will also require an upfront margin in cash. An investor can keep extra cash/pledge other holdings for the stipulated margin required.

In addition, the shares bought one day cannot be sold the next day. So, if an investor bought shares on, say, Monday, then he can only sell them after receiving the delivery of shares. So, in T+2, they can sell these on Wednesday.

If shares are sold after delivery, the funds cannot be used for new trades the same day, and can only be used the next day.

So, for instance, if an investor sold Rs 10,000 worth of Airtel’s shares on Monday, she cannot use this money to buy fresh shares of other companies. This Rs 10,000 will be cleared the next day and can be used the next day.

There are no changes in F&O rules for now till further notice.

Under the new pledging system, until now, when anyone pledged stocks as collateral to receive margins for trading F&Os, they had to move it from their demat account to the broker and, in turn, to the clearing corporation.

Going forward, the stock will continue to remain in the demat account and can be directly pledged to the clearing corporation.

“Over the last weekend, we have unpledged all securities which were pledged with us to the customer demat account and many have repledged it, using the new mechanism,” Zerodha said in a note to clients.

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