Intraday trading in stock markets to be hit by new SEBI rule
In what could mark the end of intraday trading, which accounts for 90 per cent turnover in the stock markets, markets regulator SEBI has put out a circular on upfront collection of margins from clients in the cash and derivatives segment.
 
According to brokerage estimates, intraday margins will go. This could result in huge reduction in intraday turnover which is almost 90 per cent of all turnovers. This is because an excess intraday margin provided could result in margin penalty.
 
SEBI has introduced the concept of peak margin reporting. The clearing corporations shall send four snapshots during the day for identifying the margin requirements for clients across the day.
 
Margin penalty to be based on a higher peak margin reported during the day based on snapshot files or end of day margin as per current practice. "This practically means, no more intraday leverage," said Jimeet Modi, Founder and CEO, Samco Group.
 
This measure will be rolled out effective from December 1, 2020. There will be a phased adoption over 3 phases of 3 months each and full adoption by September 1, 2021.
 
Nitin Kamath of Zerodha tweeted: "Today's SEBI circular says that all brokerage firms have to stop intraday leverage products by August 2021 in a phased manner".
 
Modi of Samco Group said: "This was expected since last year after the December 2019 circular. Now the industry and exchanges will need to adjust to this new reality. This probably will also accelerate the market share towards discount brokers from full service brokers. Differentiated margins was a service offering by full service brokers which has now been arbitraged away.
 
"Our estimate is that almost 30-35 per cent of the intraday turnover is based on additional leverage provided by brokers. Now assuming full margin is required, total turnover would shrink by approx 20 per cent since balance part margin was still being collected from clients."
 
Clients will need to maintain a lot more margins for initiating intraday trades. Return on investment on intraday trading will fall substantially.
 
In the period of phased adoption, brokers shall make sure that the funded component is out of their funds and not clients funds. This is going to be difficult for most brokers, Modi said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
Comments
arvgwl
1 year ago
Young people are self-trading in the temptation of attractive advertising and low brokerage like free brokerage, 20 / - per trade, without the understanding of the market, people who are doing mobile trading should make mandatory certification like NISM for such people, SEBI should also pay attention to this, otherwise, with the hard-earned money of many people, there will be a fatal impact on the minds of the youths. No big deal that those people go into dipresion,
Indian media should bring these facts before the society.
saumitr4
Replied to arvgwl comment 6 months ago
You seriously don't know anything, i myself a intraday trader and I know what I can do. i spent months to learn and came up with fantastic results. If you people don't know anything then shut your mouth and don't fuck with our lives. we will fight against it.
Ramesh Popat
1 year ago
intra day traders are many millions, rising volatility.
derivatives must also be strictly allowed.
mywopy
1 year ago
Good move by SEBI.

This regulatory change will now discourage the short term speculating addicts among the working class population and encourage them to think about long term investments for their retirement.

This should have been done long time back.

SEBI should also introduce a minimum capital requirement and a knowledge awareness certification before someone is allowed to do short term speculation of the capital markets.
saumitr4
Replied to mywopy comment 6 months ago
You seriously don't know anything, i myself a intraday trader and I know what I can do. i spent months to learn and came up with fantastic results. If you people don't know anything then shut your mouth and don't fuck with our lives. we will fight against it.
sathish.sathya.sathya82
Replied to mywopy comment 1 year ago
People will start moving to some other gambling market 😂😂actually sebi sucks soon they will be failed like modi government
akumar192022
Replied to mywopy comment 1 year ago
Trading is all about speculation. Investors speculate long term price movts. Intraday traders speculate short term. This rule will prevent price discovery which is the very essence of trading equities/commodities.
smsosos34
Replied to mywopy comment 1 year ago
Short Term Speculation is nothing different from a Long Term one. It's also another mode of investment. Difference is just in its duration. What's wrong in it?
Yeah, changes are inevitable and people have to abide by. That's ABC of either trading or a business as such.
Newme
Replied to mywopy comment 1 year ago
Speculation is the basic tenet of Stock market. This circular simply states you have to speculate with your money on hand.
DVN
Replied to Newme comment 1 year ago
yes
smsosos34
Replied to Newme comment 1 year ago
Exactly!
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