There is surely a short term worry but as we shall see later, the concern over the long run is not too pronounced. Let us look at the short run first. It is estimated that Rs.30,000 crore every day is generated through intraday trading with additional leverage. This is the speculative volume that could get hit as a result of the shifting in margining formula.

Currently, brokers are permitted to collect minimum 40% for MIS trades and 25% for CO trades. Effective from August 01, all cash market and F&O trades, even for intraday purpose will require the full 100% margin to be collected. Already, traders in equities have warned that this could herald the end of the traders that provided the liquidity in the market.

What will be the impact on volumes in the market? Traders must be ready for short term disruption of market volumes on the downside. However, in the long run, it should be positive because even in the past any technology or process shift has only improved the capital markets. This would reduce speculation in the long run and make markets safer.

If you look back, most people called it the end of trade when Badla was banned or when open outcry system or when STT was introduced in India or when client levels margins started or even when online trading was launched. Each of these shifts ended up making the markets deeper, wider, robust and stronger. It should happen this time around too!