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Wondering how it can impact your trading or investing? No worries we have made it simple to understand the impact and changes in Peak Margin by answering some of the frequently asked questions.
What is the current process of Margins?
Margins are the limits (funds or collateral limits) that are required to create the position in equity or derivatives. As per SEBI when a position is being created a broker should have the defined upfront margins from the customer. The Margins/limits can be either in form of funds or in form of pledged securities etc.
How much margin is required to create a position in Equity & Derivatives?
The minimum margin required for creating a position in equity will be basis the VAR+ELM+Adhoc margins and in derivatives, it will be basis the SPAN+Exposure+Adhoc margins.
How is the margin reporting done?
These margins collected are to be reported for all open positions at the end of the day. Say for an underlying the margin requirement is 20% i.e. for Rs. 1 lac position, a customer is required to have an upfront margin of Rs 20,000 and the same needs to be reported at end of the day to the Exchange by the broker if the position is carried forward.
Till now as the margins are to be reported at the end of the day so all positions which were squared off intraday were not required to be reported. With this exception, brokers were able to offer extra leverage to their customers. Higher leverage meant higher profits and at the same time higher losses. In order to safeguard the interests of retail customers and to restrict the leverage and strengthen the overall risk management in trading, SEBI came out with the concept of Peak Margin collection & reporting.
What is Peak Margin?
Peak Margin is a mechanism to calculate the maximum margin requirement at a point of time during the day considering all open positions at that point of time i.e. both intraday or carry forward. With Peak margin, SEBI is trying to restrict the excess leverage and make sure the prescribed margins are collected upfront for trade. So say for illustration for an underlying the upfront margin requirement is say 20% i.e. for Rs. 1 lac position the customer is required to have upfront margins of Rs 20,000 but if the customer squared off the position then this was not required to be reported before December 1,2020. Now with peak margin requirement for intraday positions also, margin collection is reported. The implementation of this is done in a phased manner from 0% in September 2020 to 25% in December 2020 to 50% in March 2021 to 75% in June 2021 and then 100% from September 2021. So in case, there is a shortfall in peak margin collection then the broker will be responsible for it and a penalty will be levied on the broker.
Who will report for Peak Margin Shortfall?
The broker is required to report the shortfall if any in the collection of Peak margins from clients.
Who is liable to pay the penalty on the peak margin shortfall?
The broker is liable for both reporting the shortfall in collection of peak margin and pay penalty on such shortfall. The penalty is in the range of 0.5% to 5% of the shortfall amount on a daily basis.
Is margin increased for all AxisDirect products?
No, margin is increased for Equity Cover product, Future cover product, and Options Cover product only.
Which products are not impacted?
Following products have not gone under any changes due to the introduction of Peak margin.
| Product | From June 1, 2021 |
| Cash Buy/Sell, E-Margin, Equity Intraday, Future Margin, Future Intraday, Options Margin, Currency, Commodities | There are no changes in these products |
Which products will have to pay higher margins?
In the case of Cover Products margins have increased.
Is there a change in margins for intraday products?
No there is no change in Margins for other Intraday products in Equity, Future, Currency, and commodities.
Will the Collateral/Margin Pledge facility be available for providing margins?
Yes, you can use the Collateral i.e. Margin Pledge facility against their shares for creating limits/margins for trading in Equity or Derivatives.
What happens to sales proceeds of shares sold from Demat account?
Cash / Collateral sales proceeds will be available as a limit only to the extent of 80% from T day (This effectively means there is no change in current limit from 1st June 2021). Hence if you sell Rs.100 worth of shares he can buy back/use limits only up to Rs.80 on T day onwards. Balance Rs. 20 can be used only after T+2nd day.
Can funds held during the day for trading available for release?
Funds releasable during the day will be as per below:
Equity Cash: For trades done in the equity cash products including SIP, GTDt, or a combination thereof, fund releasable during the day will be upto 20%, post meeting the obligation required.
Equity Intraday: For trades done in equity intraday product or a combination thereof, fund releasable during the day will be upto 20%, post meeting the obligation required.
Equity Derivatives and Currency Derivatives Margin: For trades done in equity derivatives and currency derivatives margin product or a combination thereof, fund releasable during the day will be upto 20%, post meeting the obligation required.
All fund release requests in excess of the above stated limits shall be processed on the same day EOD, after accounting the peak margin requirement. It is recommended to plan the funds withdrawal / release from your trading activity accordingly.
Will there be a change in margins for Cover products?
Yes, margins will be increased in all Equity and Futures Cover products. But there will be no change in the Options Buy in Options Cover product.
Where can I check the peak margin requirements during the day?
Currently, it can’t be checked intraday because Exchanges provides this data at EOD with final client-wise maximum Peak margin requirement.
Will, there be any debit for my intraday trades for Peak margins
As Intraday and square off trades will attract Peak Margin, the Peak Margin amount will be debited from the your bank account and released on the next day only.
In case a customer wants to increase his exposure for intraday trades, how can it be done?
The customer can use the Collateral/margin Pledge facility for this purpose apart from funds block in his bank account.
For which products margins are impacted?
Following products will have changes in margin requirements.
| Product | Currently | From June 1,2021 | The changes |
| Equity Cover | Around 10% margins are charged | Changed | Margins revised upwards to 17% |
| Future Cover | Around 10%-16% margins are charged | Changed | Margins revised upwards to 15%-20% |
| Option Cover | Around 10% margins are required | Changed | Margins revised upwards to 15% |
| Limits against Sales Proceed | Cash / Collateral sales proceeds will be available as a limit only to the extent of 80% from T day as compared to 100% currently on T day. Hence if you sell Rs.100 worth of shares he can buy back/use limits only upto Rs.80 on T day onwards. Balance Rs. 20 can be used only after the T+2nd day. | Unchanged | Cash / Collateral sales proceeds will be available as a limit only to the extent of 80% from T day as compared to 100% currently on T day. Hence if you sell Rs.100 worth of shares he can buy back/use limits only upto Rs.80 on T day onwards. Balance Rs. 20 can be used only after the T+2nd day. |
| Encash | Product disabled | Unchanged | Product disabled |
Is there a change in any Fund Release process?
Yes, the following process is modified to include the Peak Margin collection & reporting.
Equity Cash: If any client has traded in the equity cash products including SIP, GTDt, or a combination thereof, fund releasable will be 20%, post meeting the obligation required.
Equity Intraday: If any client has traded in equity intraday product or a combination thereof, fund releasable will be 20%, post meeting the obligation required.
Equity Derivatives and Currency Derivatives Margin: If any client has traded in equity derivatives and currency derivatives margin product or a combination thereof, fund releasable will be 20%, post meeting the obligation required.
All fund release requests in excess of the above stated limits shall be processed on same day EOD, after accounting the peak margin requirement. It is recommended to plan the funds withdrawal / release from your trading activity accordingly.
Is there a change in any process?
Yes, the following process are modified to include the Peak Margin collection & reporting.
| Product | Currently | From June 1,2021 |
| Debit of Peak Margins | Actual debit will happen with respect to peak margin requirement from the Bank account | Unchanged |
| Securities received in pay-out | Will be shifted to CUSA account for any outstanding ledger balance or Peak margin requirement | Unchanged |
| Blocking of Funds & collateral used for trading | Will be blocked for settlement and Peak margin obligation | Unchanged |