Client Margins: Exchanges, Clearing Corps Asked to Implement Framework to Verify Upfront Collection

Moneylife Digital Team 02 February 2023

Market regulator Securities and Exchange Board of India (SEBI) asked stock exchanges and clearing corporations to implement the framework it prescribed in July 2020 to enable verification of upfront collection of margins from clients in cash and derivatives segments.

In the circular issued on 1 February 2023, SEBI says, “Stock exchanges and clearing corporations are directed to take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules, regulations bring the provisions of this circular to the notice of their members and also disseminate the same on their websites; and communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Development Report. The provisions of this circular shall come into effect three months from the date of issuance of this circular.”

The framework issued by SEBI on 20 July 2020 was subjected to certain amendments after consultations with exchanges and clearing corporations. The circular issued on 10 May 2022 mentioned that the margin requirements to be considered for the intra-day snapshots, in derivatives segments, including commodity derivatives, should be calculated based on the fixed beginning of day (BOD) margin parameters. It was also specified that there should be no change in the methodology of determination and collection of end-of-day (EOD) margin obligations of the client.

However, SEBI clarified that the change is only for verifying the upfront collection of margins from clients. The margin parameters applicable for the collection of margin obligation by clearing corporations will continue to be updated on an intra-day and EOD, it had said.

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