InvestorQ : What are the key features of the new margining system that has been announced by SEBI today? Is it going to be beneficial traders?
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What are the key features of the new margining system that has been announced by SEBI today? Is it going to be beneficial traders?

Answer
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8 months ago


While you still need to go through the fine print and the exchange circulars on the subject, the idea of the new margining system is that the margin requirements for hedged positions have come down substantially. Here are some of the key highlights of the announcement by SEBI.

· The margining system for the naked positions (un-hedged positions) will be the same as before. In fact, it could be slightly higher because the circular hash mandated minimum margin of 21.5% so it could go up in many cases.

· The margins for hedged positions are down by nearly 70% and that could be a boost for volumes in F&O in the market, especially writing of options as a hedge. You could see big volumes in option selling picking up.

· The risk net has been increased from 3.5 sigma to 6 sigma, which means that any increase in margins in the event of volatility could be much higher in the new margining scenario.

· You need to be careful about not breaking one side of the hedges. The moment that happens, you could see a sharp increase in the margin requirement as now the hedge margin benefit will go away.