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What is the current process of Margins?
Margins are the limits (funds or collateral limits) which 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 securities etc.
How minimum margins charged in Equity & Derivatives?
The minimum margin requirement for creating a position in equity is basis the VAR+ELM+adhoc margins and in derivatives it is SPAN+Exposure+adhoc.
How is the margin reporting done?
These margins collected are to be reported for all open positions at the end of day. Say for illustration for a underlying the margin requirement is say 10% i.e. for a 1 lac position a customer is required to have upfront margin of Rs 10,000 and the same needs to be reported at end of day if the position is carry forward.
Till now as the margins are to be reported at the end of 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 its customers. Higher leverage meant higher profits and at the same time higher losses. In order to ensure that the retail customers are safeguarded by restricting the leverage and to 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 upfrontfor trade. So say for illustration for an underlying the upfront margin requirement is say 10% i.e. for a 1 lac position the customer is required to have upfront margins of Rs 10,000 but if the customer squares off the position then this is not required to be reported till now. Now with peak margin requirement for intraday positions also, margin collection will be required to be reported. The implementation of this is done in phased manner from 0 in September to 25% in December 2020 to 50% in March 2021 to 75% in June 2021 and then 100% from Sep 2021. So in case there is a shortfall in peak margin collection then the broker will be responsible for it and penalty will be levied on the broker.
Who will report for Peak Margin Shortfall?
Broker is required to report the shortfall if any in collection of Peak margins.
Who is liable to pay the penalty on the peak margin shortfall?
Broker is liable for both reporting the shortfall in collection of peak margin and pay penalty on such shortfall. The penalty is in range of 0.5% to 5% of the shortfall amount on a daily basis.
Is margins increased for all AxisDirect products?
No, margin are increased only for Equity Cover product, Future cover product and Options Cover product only.
Which products are not impacted?
Following products will not have any changes due to introduction of Peak margins.
|Product||From Dec 1, 2020|
|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 case of Cover Products margins will get increased.
Is there change in margins for intraday products?
No there is no change in Margins for other Intraday product in Equity, Future, Currency and commodities.
Will Collateral/Margin Pledge facility be available for providing margins?
Yes customers can use the Collateral i.e Margin Pledge facility against their sharesfor 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 70% from T day as compared to 100% currently on T day. Hence if a client sells Rs.100 worth of shares he can buy back/use limits only upto Rs.70 on T day onwards. Balance Rs. 30 can be used only after T+2nd day.
Can funds held during the day for trading available for release?
Funds held at the beginning of the day or anytime during the day for trading will not be available for release during the day. Excess / unutilized funds on HOLD will be released after retaining for Peak / Normal margin requirements and settlement obligations during End of day processing or on T+1 day morning.
Will there be change in margins for Cover products?
Yes margins will be increased in all Cover product as follows:
In Equity Cover product the minimum margins will be raised to 7% or more from current 2%,
In Future Cover product the minimum margins will be raised to 5% from current 1%,
In Options cover product for option writing the minimum margins will be raised to 6% from current 1%,
But there will be no change in Options Buy in Options Cover product.
Where can I check peak margin requirement during the day?
Currently it can’t be checked and Exchange 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 client’s bank account and released next day only.
In case a customer wants to increase his exposure for intraday trades, how can it be done?
Customer can use the Collateral/margin Pledge facility for this purpose.
For which products margins are impacted?
Following products will have changes in margin requirement.
|Product||Currently||From Dec 1,2020||The changes|
|Limits against Sales Proceed||100% limits against sales proceed are provided||Changed||Cash / Collateral sales proceeds will be available as a limit only to the extent of 70% from T day as compared to 100% currently on T day. Hence if a client sells Rs.100 worth of shares he can buy back/use limits only upto Rs.70 on T day onwards. Balance Rs. 30 can be used only after T+2nd day.|
|Encash||Product available||Changed||Product will be disabled|
|Equity Cover||Around 2%-5% margins are charged||Changed||Margins revised upwards to 7%-10%|
|Future Cover||Around 1%-5% margins are charged||Changed||Margins revised upwards to 5%-16%|
|Option Cover||Around 1% margins are required||Changed||Margins revised upwards to 6%-7%|
Are there change in any process?
Yes following process will get changed or modified to include the Peak Margin collection &reporting.
|Product||Currently||From Dec 1,2020||The changes|
|Funds held for trading||Unutilised amount is releasable during the day||Changed||Unutilised amount will be released only post the end of day process after deducting peak margin obligation|
|Debit of Peak Margins||Currently not done||Changed||Actual debit will happen with respect to peak margin requirement from Bank account|
|Securities received in pay-out||Currently shifted to CUSA account for any outstanding ledger balance/funds obligation||Changed||Will be shifted to CUSA account for any outstanding ledger balance or Peak margin requirement|
|Blocking of Funds & collateral used for trading||Currently blocked for settlement obligation||Changed||Will be blocked for settlement and Peak margin obligation|