InvestorQ : What is the SEBI’s new peak margin requirements from 1st December 2020?
Tanya Mehta made post

What is the SEBI’s new peak margin requirements from 1st December 2020?

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Priyanka Singh answered.
1 month ago
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In June, the Securities and Exchange Board of India (SEBI), released guidelines to enable verification and upfront collection of margins from clients in the cash and dedication segment. The framework comes into effect today.

The regulator has reiterated that the applicable upfront margins will be collected from the clients in advance of the trade. 
SEBI said clearing corporations will send a minimum of four snapshots of client-wise margin requirements to the trading members (TM) or clearing members (CM) for them to know the intra-day margin requirement per client in each segment.
It further said the number of times snapshots need to be sent in a day may be decided by the respective clearing corporation depending on market timings subject to a minimum of four snapshots in a day. The snapshots would be randomly taken in pre-defined time windows.

For the commodity derivatives segment, Sebi said the last snapshot for commodity derivatives will be generated at 5 PM.
The objective of the peak margin is to curtail the leverage given to clients' derivatives. SEBI said peak margin obligation of client across snapshots will be adopted in a phased manner.

This will be as follows-

Phase-I : (1st Dec 20 to 28th Feb 21): -  penalty if margin blocked is less than 25% of the minimum 20% of trade value (VAR+ELM) for stocks or SPAN+Exposure for F&O.

Phase-II: (1st March 21 to 31st May 21): - penalty if margin blocked less than 50% of the minimum margin required.

Phase-III :(1st June 21 to 31st Aug 21): - penalty if margin blocked less than 75% of the minimum margin required.

Phase IV: (1st Sept Onwards): - penalty if margin blocked less than 100% of the minimum margin required.

It further said the shortfall in the collection of margins will be calculated by taking into consideration the phased adoption of peak margin obligation of the client.
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