Peak Intraday Upfront Collection of Margins from Clients in Cash and Derivatives segments

Nov 28, 2020 10:00 AM 2553 views

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SEBI vide Circular Ref. CIRCULARSEBI/HO/MRD2/DCAP/CIR/P/2020/127 dated July 20, 2020 reiterated that the applicable upfront margins are required to be collected from the clients in advance of the trade. Further, with an objective to enable uniform verification of upfront collection of margins from clients by TM/ CM and levy of penalty across segments, SEBI has decided that the Stock Exchanges/ Clearing Corporations shall adopt the specified framework, for the purpose of ‘Mechanism for regular monitoring of and penalty for short-collection/ non-collection of margins from clients’ in Cash and Derivatives segments.

The summary of a prescribed framework in Cash and Derivatives segments is as follows: -

a. Clearing Corporations will send at least 4 snapshots of client wise margin requirement to TMs/CMs for them to know the intraday margin requirement per client in each segment.

b. The client wise margin file provided by the CCs to TMs/CMs will contain the EOD/peak margin requirements of the client across each of the intra-day snapshots and the members to report the same.

c. The peak margin obligation of client across snapshots shall be adopted in a phased manner starting from December 1, 2020 and will be completely adopted from September 1, 2021, in the following manner: -

  • Phase 1 (for 3 months from the date of implementation) - 25%
  • Phase 2 (for subsequent 3 months) - 50%
  • Phase 3 (for subsequent 3 months) - 75%
  • Phase 4 (subsequently) -100%

d. Higher of the shortfall in collection at peak and EOD margin shall be considered for levying of penalty and the verification for the above will be done by exchanges/ CC on a weekly basis by verifying the balances in the books/ ledgers of the TM/ CM in respect of the client.

e. Shortfall in collection of margins shall be calculated by taking into consideration the aforesaid phased adoption of peak margin obligation of client.

Important Points to be noted based on the clarifications provided by the Exchanges

1. In respect of sale of shares by a client for which early pay-in (EPI) of securities is made by the clients in the pool account of the Broker on the trade date, there is no separate requirement to collect upfront/peak margins on the same.

2. In respect of sale of shares by a client for which early pay-in of securities has been accepted by the clearing corporation , the same may be considered as margin collected towards peak margin for the said sale transaction. However, the sale value of such securities (EPI value), as reduced by value of the 20% upfront Margin, shall be available as Margin for other positions across all the segments.

3. Applicable upfront margins are required to be collected from the clients in advance of the trade. In view of the same, free and unencumbered collaterals can be released in case peak margin obligation across all segments is fulfilled.

4. The client can square off the position during the day and use the same margin released due to square off of the position, on same day.


Click here for SEBI Circular dated July 20, 2020

Click here for NSE Circular and Click here for FAQ issued by NSE on Peak Margin Collection & Reporting dated November 27, 2020

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Tags: #Finance

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