NSE Flags Margin Trading Violations By Stockbrokers As MTF Book Surges To ₹1.48 Lakh Crore

The National Stock Exchange (NSE) has identified multiple compliance violations by stockbrokers, including inadequate margin collection and extending margin trading facilities (MTF) against ineligible securities.

As per a report by Moneycontrol, the findings emerged from inspections of trading members and authorised persons (APs) conducted between October 2025 and March 2026.

The exchange highlighted deficiencies involving client funds, trading terminals, regulatory reporting, documentation and cybersecurity.

NSE Flags Margin Trading And Client Fund Irregularities

Under MTF rules, brokers must collect sufficient margins through cash, cash equivalents or eligible Group I shares after applying prescribed haircuts.

However, NSE found instances of brokers accepting ineligible securities and failing to maintain adequate margins.

The findings come amid rapid expansion in margin trading.

According to BSE and NSE data compiled by Care Edge Ratings, the MTF book increased from Rs96,000 crore in August 2025 to Rs1.48 lakh crore in August 2026.

Inspectors also identified delays in issuing daily margin statements, incomplete disclosures and inaccurate reporting of margin collections and mark-to-market losses.

Other violations included improper client fund settlements, discrepancies in retention statements and payouts exceeding available client balances.

Some brokers passed penalties for short collection of upfront margins to clients and failed to send mandatory SMS and email notifications during fund settlements.

NSE also flagged authorised persons handling client funds, using client login credentials for unauthorised transactions and seeking permission to trade on clients' behalf.

Other irregularities included excessive trading to generate brokerage, promises of assured returns, profit-sharing arrangements and unauthorised portfolio management.

The exchange identified unapproved promotional material, missing trade confirmations and incorrect reporting of clients assigned to authorised persons.

Some trading terminals operated from unreported locations or were used by unauthorised individuals.

Deficiencies also involved incomplete registration documents and failures to comply with Securities and Exchange Board of India (SEBI) technology-based know your customer (KYC) requirements.

Brokers also failed to provide completed registration documents within seven days of uploading clients' Unique Client Codes.

Additional lapses included inaccurate contact details, failure to classify accounts inactive after 24 months without trading and improper use of shared email addresses for contract notes.