All About Phase 3 of SEBI’s peak margin Rule

By | June 1, 2021 3:33 pm

The next phase of new margin norms by SEBI comes into effect today. As per the new norms, the peak (minimum) margin requirement will be revised upwards to 75% from 50% earlier. Click here to read the SEBI circular

Last year, the regulator, Sebi, introduced the so-called peak margin norms in a bid to minimize speculative trading.

The norms are being implemented in phases starting December 2020. Between December 2020 and February 2021, traders were supposed to maintain at least 25 per cent of the peak margin. This margin was raised to 50 per cent between March and May. The same will be raised to 75 per cent between June and August. And finally to 100 per cent September 1 onwards.

The second phase had already dented volumes, and market players fear a further decline in volumes — particularly in intraday cash and futures — as the 75 per cent peak margin norms kick in.

Let’s understand this with Few example:

One lot of NIFTY Future is valued at 1,66,000

Margin required to buy one lot of Nifty futures for Intraday is  1,66,000 * 50/100 =  83,000

From 1st June, margin requirement  will be changed from 50% to 75% in Intraday.

So now, margin requirement for the same position will be 1,66,000 * 75/100 =  1,24,500.

One lot of BANK NIFTY Future is valued at 1,76,000

Margin required to buy one lot of Nifty futures for Intraday is  1,76,000 * 50/100 =  88,000

From 1st June, margin requirement  will be changed from 50% to 75% in Intraday.

So now, margin requirement for the same position will be 1,76,000 * 75/100 =  1,32,000.

One lot of RELIANCE is valued at 1,21,000

Margin required to buy one lot of Nifty futures for Intraday is  1,21,000 * 50/100 =  60,500

From 1st June, margin requirement  will be changed from 50% to 75% in Intraday.

So now, margin requirement for the same position will be 1,21,000 * 75/100 =  90,500.

“Nowhere in the world, clients are required to pay upfront peak margins. Already open interest in the Nifty is more in Singapore compared to India, though it is a product based on Indian stocks.”

How does this affect Retail Traders:

  • Leverage on Futures and Options selling will be now 1.3x, which was 2x earlier
  • For Currency and MCX Futures, leverage will be 3x, which was 2x earlier
  • For equity Innaday and Options buying, there will be no changes
  • Trading volumes can be hit as the 75 per cent peak margins norms come into effect from Tuesday.
  • If you are an investor taking delivery of shares, there is no material impact on your day-to-day activity whatsoever. You can continue to invest without any hassles by maintaining the required upfront margin.
  • If you are an intraday trader using high-exposure facilities such as Margin Intraday Square-Off (MIS) and/ or Super Multiple (SM) then the margin requirement will increase and hence the leverage in intraday order types will reduce.

4 thoughts on “All About Phase 3 of SEBI’s peak margin Rule

  1. mvn

    SEBI MANAGEMENT LOOKS LIKE A BUNCH OF IDIOTS ,THEY DON’T KNOW abcd of Financial markets

  2. Bramesh Post author

    Most of retailers are not disciplined this rule is best for retailers !!

  3. PS Hariharan

    Good evening Brameshji. Yes . This rule is hitting the Retailers very hard.

    Inspite of CPAI’s best efforts (by showing snap shots of Margin requirement under new rule in different times to SEBI) and request for continuing with current 50 %…

    https://economictimes.indiatimes.com/markets/stocks/news/cpai-asks-sebi-to-continue-with-current-50-peak-margin-requirement-defers-next-stage/articleshow/83112175.cms

    May be , many retailers would be forced to trade in less number of lots …Very Sad.. Hope, SEBI retraces the step sooner…

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