sebi rules: New Sebi rules come into effect. How it may affect traders and brokers
“Penalties for brokers for not maintaining adequate working capital requirements kick in from 1st Aug. The second phase of the SEBI circular requiring brokers to provide a client-level allocation of funds to avoid one customer’s funds from being used by another goes into effect. This regulation was originally introduced in May 2022,” discount broker Zerodha said in a blog post.
Further, if stocks are pledged as a margin for trading F&O, the customer must provide 50 per cent of the margins used in cash. If they don’t, the broker’s capital will get blocked from fulfilling the cash component requirement by the clearing corps from August 1.
Zerodha said that if a customer explicitly takes an F&O trade that causes their account to go into a debit resulting in a negative margin balance intraday or overnight, for example, exiting a hedged position, then the brokerage charges for orders placed during the duration where the account had negative margins, will be Rs 40 instead of Rs 20. “This does not change anything for the vast majority of the customers. To ensure that this scenario doesn’t apply, simply ensure sufficient margin when taking trades,” Zerodha said.
Capitalmind founder and CEO Deepak Shenoy said that the new rules will change the game substantially for brokers as, if you can’t commingle cash, then brokers will have to put up cash from their balance sheets.
“If one client goes overlimit (say wrote an option on a stock that suddenly went up 10 per cent and wiped out margin plus more) brokers have to fund the difference. Earlier there would just be excess cash in other clients so no impact overall. The broker would have to recover from the client but the exchange didn’t have to care. Now exchange does, and it will block any individual client that exceeds limits,” Shenoy said.
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