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The fourth and final phase of market regulator SEBI’s new peak margin rules goes into full force from today, under which the market participants will have to spend more towards margins as per the new norm, intraday traders required to pay entire i.e., 100% upfront margin instead of 75%. The new rules mandate to collect minimum margins on leverage-based trade upfront four times every session as against earlier practice of collecting it at the end of the day.
The first leg of this peak margin rule was implemented in December 2020 with 25% upfront margin, which was later increased to 50 & 75%. Market participants and analysts find implementation of the final phase of rules to be challenging for intraday traders, brokers and exchanges as they expect intraday trading to become more difficult for traders ahead.
Meanwhile, online brokerage firm Zerodha’s founder and CEO Nithin Kamath finds it to be a dreaded day for stock brokers and traders as the new margin rules come into effect. “The dreaded day for brokers, exchanges, intraday traders, is here,” he tweeted.
“Btw, for F&O, the intraday margins may end up being 105% of SPAN+Exposure to cover for the intraday margin increases due to volatility or notional losses on short option positions,” Kamath further explained while retweeting a post from Zerodha’s official twitter handle.
“Starting today, intraday leverages will reduce under the new peak margin regulations. Maximum leverage for Equity will be 5X (20% of trade value) and 1X (100% of NRML margin) for F&O for MIS and CO product types,” Zerodha tweeted. Since intraday traders generate the maximum volumes and revenues, it is expected to affect the brokerage industry significantly as well.
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