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Upfront Margin In Cash Segment

  • Published: Wednesday, 11 November 2020

Flat 20% upfront margin to be collected in Cash Segment from Sep 1st, 2020.

As per SEBI circular Dated Nov 19, 2019 brokers are now required to collect and report margins in the cash segment just like is currently applicable in derivatives segment. Let’s start by understanding SEBI's motive behind this move and further gather how this will affect your trading in cash segment with SAS Online.

Traditionally brokers allow clients to buy/sell stocks for the delivery without asking for upfront margins or delivery.Client is required to fund the account until T+1 after execution of trade or transfer the sold shares by providing a DIS slip. This practice however increases the risk to the broker and the overall system as the client may not pay up or provide shares sold thus defaulting in case of adverse market movement.

The new circular asks for a Minimum flat 20% of value of transaction needs to be collected upfront irrespective of VAR+ELM of the stock. This greatly simplifies things as we at SAS already collect 100% upfront margin in CNC delivery. In case of a sell transaction, we are doing EPI (Early Pay-in) in which case no margin on the sell transaction will be levied by exchange. However, in special cases there might be margin shortage and levy of penalty. Please go through below case to understand.

In case of BTST (Buy Today Sell Tomorrow) minimum 40% margin will be levied and there might be a shortage in case full funds (which are released from selling stocks) are utilized in the FO/CDS segment for taking new positions. Let us understand how generally exchanges in India follow T+1 settlement mechanism to explain If you buy a share on Monday (T Day), securities will be credited to your account on Tuesday (i,e T+1 Day, which is payout day of securities ) similar will be the case in selling if you sell any stock on Monday( T day) it will be debited from your account on Tuesday (i,e T+1 Day, which is pay- in day ) accordingly funds are also credited and debited.

For latest exchange cash margins, VAR/ELM/Adhoc click here.

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