Margin in stock market parlance is the amount of holding lying in your demat and trading account. The Securities and Exchange Board of India (SEBI) has been introducing trading reforms from time to time, many of which have been around margins. In one such reform, the market regulator introduced an upfront margin.
In a circular dated 31 July 2020, SEBI addressed all recognised stock exchanges and clearing corporations on the subject of collection and reporting of margins trading member (TM) and clearing member (CM) in the cash segment.
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In this circular, SEBI decided the following –
The stock exchanges released further clarification on the upfront margin requirement. The key points clarified are:
Capital market – TMs must collect VaR and ELM margins from clients upfront. Other margins, if and when prescribed, have to be collected within T+2 days.
F&O segment – TMs must collect SPAN and ELM margins from clients upfront, while delivery margin and margin on consolidated crystallised obligation must be collected by T+1 days.
Currency derivatives – TMs would collect the initial margin and ELMs upfront. The margin on consolidated crystallised obligation must be collected by T+1 days. In currency futures contracts, the final settlement would be collected in T+2 days.
Commodity derivatives – Same upfront requirement as currency derivatives. Other margins, if and when prescribed, have to be collected within T+2 days.
Some of the effects of the upfront margin requirement are:
If you trade in multiple segments, including F&Os and equities, these requirements are applicable to your trades. The SEBI aims to protect the interest of the investors and regulate the securities market better with such rules and amendments.
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