SEBI has prescribed a new set of guidelines focusing primarily on Peak Margin Collection & Reporting, and these guidelines have come into effect from 01-Dec-20. Here’s a quick synopsis on what’s new and how it affects you and your trading activity.
Before we go to Peak Margin, let’s understand the concept of Margin.
WHAT IS MARGIN & MARGIN REPORTING?
Margin Trading allows you to purchase shares by paying only a part of the trading value. Margin refers to the minimum payment that you have to contribute to place your order.
Prior to 01-Dec-20:
- Brokers collected upfront margin only for the derivatives segment
- From 15-Sept-20, brokers also started collecting upfront margin for Cash segment
- Brokers reported client transactions along with the collected margin to the exchanges and clearing corporations at the end of the day
INTRODUCING PEAK MARGINS
From 01-Dec-20, to calculate the margin obligation, exchanges and clearing corporations will take minimum of 4 random snapshots of trading positions. The highest margin of these 4 snapshots will be considered as the Peak Margin of the day.
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EXAMPLE
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Snapshot of Positions during the Day
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All Values in INR
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Amount
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Minimum Margin Requirement (VAR + ELM)
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PHASE 1
(01-Dec-20 to 28-Feb-21)
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Minimum Peak Margin
(25% of Minimum Margin Requirement)
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Position 1
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1,00,000
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25,000
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6,250
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Position 2
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1,25,000
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31,250
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7,812.5
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Position 3
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50,000
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12,500
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3,125
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Position 4
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75,000
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18,750
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4,687.5
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Peak Margin Requirement during
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7,812.5
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Note: For the above example VAR + ELM is assumed at 25% (20%+5%). Value at Risk (VAR) margin depends on the liquidity of the stock, and varies from scrip to scrip. For instance, for stocks that are part of Group 1 (classified as liquid stocks), the applicable daily VAR is 3.5 times the volatility or 7.5%, whichever is higher. Extreme loss margin (ELM) is computed as 1.5 times the standard deviation of daily returns of the security price in the last six months. Minimum ELM = 5%.
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This peak margin will be collected during the day itself, and will be applicable on all segments, including Intraday trades.
WHAT DOES THIS MEAN FOR YOU
- You will need to pay upfront margin before placing any trade across all segments.
- You will need to ensure that you maintain an account balance equal to or more than the peak margin requirement in order to execute your order.
- To avoid margin shortfalls and penalty, Funds Payout will now be processed only pre and post equity market hours (Before 7.30 am and after 5.30 pm).
- Sale benefit for shares that have been sold from your account on the same day is revised to 80% (as compared to 100% prior to 01-Dec-2020). For example, if you sell your holdings worth Rs.1,00,000, you will now get limit/margin against Rs. 80,000.
4-STAGE IMPLEMENTATION
Here’s another important aspect for you to consider. These guidelines will be implemented in a phased manner from 01-Dec-2020 to September 2021, as mentioned in the table below:
| Date Range | Required Upfront Peak Margin (% of the minimum requirement) |
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| Phase 1 | 01-Dec-20 to 28-Feb-21 | 25% |
| Phase 2 | 01-Mar-21 to 31-May-21 | 50% |
| Phase 3 | 01-Jun-21 to 31-Aug-21 | 75% |
| Phase 4 | 01-Sept-21 onwards | 100% |
In conclusion, here are 2 recommendations to ensure that you don’t face any disruptions due to inadequate funds:
- Keep your Angel Broking account well-funded at all times
- Pledge your shares lying in your Angel Demat account
For more details, feel free to visit the below links.
