SEBI Revises Margin Collection Settlement: TM's And CM's To Collect Their Margins Except VaR And ELM

Markets regulator SEBI on Monday directed brokers to collect all other margins, except value at risk (VaR) and Extreme Loss Margin (ELM), by the T+1 settlement day. The decision has been taken due to the shift from T+2 to T+1 settlement cycle.

"With effect from January 27,2023, the settlement cycle has been reduced from T+2 to T+1 across all scrips in the cash market," the regulator said.

Trading members or clearing members are required to mandatorily collect upfront VaR margins and ELM from their clients. Earlier, they had time till 'T+2' working days to collect margins (except VaR) margins and ELM) from their clients.

The regulator said clients still need to pay margins when calls are made. It further said that the time till the settlement day is allowed only for avoiding penalties, not as an extension for clients to delay payments.

"In this regard, based on representation received from the Broker's Industry Standards Forum (ISF) and to ensure a more robust risk management framework, it has been decided that keeping in view the change in the settlement cycles, the TMs (trading members)/ CMs (clearing members) shall be required to collect margins (except VaR margins and ELM) from their clients by the settlement day," SEBI said in its circular.

The new framework will be applicable with immediate effect.

In case, the client completes pay-in (money/securities) by the settlement day, it is assumed that other margins were collected and no penalty in applied. Whereas, if the payment is not made by the settlement day, a penalty will be applied.

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