REQUIREMENT OF UPFRONT MARGIN IN CAPITAL MARKET SEGMENT W.E.F AUG 01, 2020

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As per SEBI circular no: CIR/HO/MIRSD/DOP/CIR/P/2019/139 & Stock Exchanges circular No: Circular Ref. No: 45/2020 & 20200725-6, there have been changes made in margin requirement in Cash Segment of Capital Market.

As per the above circular “Upfront Margins” will be mandatory for all trades in the cash segment w.e.f. 1st August, 2020.

Below are some Key points related to the circular:

  1. Upfront margin (VAR+ELM) is required from client before placing any Trades (Buy as well as Sell). Here Upfront margin means clear funds available in the Client ledger account.

  2. In case of sell trade, margin is not required if early payin of securities is done to Stock Exchange by the Stock Broker.

  3. Securities of client lying in Brokers account (ie. Pool account & Early payin account) cannot be considered for Margin

  4. Securities lying in client Demat cannot be considered for Margin even if POA is in favor of Broker. Pledge request is to be given by the Client at security level for availing any margin against the securities.

  5. An amount of upfront margin collected from Client has to be reported by Broker to the Stock Exchanges. Any shortfall in upfront margin collection will attract penalty.

As per NJ policy, we allow trades based on 100% margin only. However, due to implementation of above Circular there would be an impact in various trades as mentioned in the below table. These measures have been taken by us in order to avoid any Penalty to our clients.

Below table explains the changes effective Aug 01, 2020 with an example:
Type of Trade Existing Practice Effective Aug 01,2020 Example for Trade done w.e.f Aug 01,2020
Buy trade which are done using Cash Margin available in Ledger Client is allowed to buy upto the Cash Margin available in the Ledger No Change, this will continue as per existing practice Cash Margin available is Rs. 1 lakh, client can Buy shares upto Rs. 1 Lakh only.
Sell trades which are available for delivery from client Demat Client is allowed to Sell shares available in his / her Demat No Change, this will continue as per existing practice Client has 1000 Qty of "ABC" Company shares available in his / her Demat, same will be allowed to sell.
Buy Trades done using margin against Sell Trade (T-day) 100% margin is provided real time on selling Margin will not be provided on T-day. Hence, Client cannot buy against the sell trades margin i.e. Margin will not be provided on selling. The Margin for such sell will be available only after clear funds are sighted in the ledger of client (T+2) Client sell 1000 Qty of "ABC" shares worth Rs. 1 lakh on 3rd of August. After selling, client will not get Rs. 1 lakh to Buy another shares on the same day. As this is not clear fund. Margin will only be released once 1 Lakh is received from the exchange i.e. T+2 meaning by on 5th of August.
Shares bought on T-day are available for Selling on T+1 day (BTST trades) This is allowed. Holding was given for selling even before receiving Buy delivery in Client Demat This will not be allowed. Shares bought on T-day will be available for selling only after shares are delivered to Client Demat. Shares are delivered on T+2 afternoon so client will be able to sell the same on T+3 Client Buys 1000 Qty of "ABC" share on 3rd of August, it will be available for selling once actual delivery is received in Client Demat account i.e. T+3 meaning by 6th of August
Buying Shares in Cash Segment against selected Mutual Fund units opted for Margin Client is allowed to buy shares using Mutual Fund units as margin This will not be allowed as securities in Client Demat cannot be used as Margin based on POA N.A.
Intraday BUY and SELL Intraday buy and sell is allowed and no additional margin is required No Change, this will continue as per existing practice Client Buys 1000 Qty of "ABC" share and the same are sold on same day.

Further, in order to comply with the new SEBI circular, we will have to discontinue Margin facility which is currently offered in Capital Market on selected Liquid Mutual Fund schemes on E-Wealth Account Platform. Accordingly following steps will be taken by us:

  1. All existing Mutual Fund schemes units which have been opted by clients for the Capital Market Margin will be released on 31.07.2020. Accordingly, no margin will be provided on the MF Liquid Schemes effective 03.08.2020.

  1. No new request will be accepted for opting Mutual Fund units for Capital Market margin effective 01.08.2020.

Should you require any further assistance or information, please feel free to contact our Customer Care on +91 141 494 1762 or 9898042460 or 8780904530

 

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