Stock brokers' association ANMI on Monday said it has requested markets regulator SEBI to reduce peak margin for intraday trades to a maximum of 50 per cent, from the current 75 per cent level.
Reduction in the peak margin will be in the interest of individual investor, trading members and help in the growth of the capital market, ANMI said in a statement.
The peak margin concept was introduced from December 2020 onwards, wherein members were required to collect 25 per cent of the applicable margin from the clients which was increased to 50 per cent and at present 75 per cent of the applicable margin is being collected towards peak margin.
This will further increase to 100 per cent from September onwards.
The Association of National Exchanges Members of India (ANMI) said it has been receiving representation from its members to take up with SEBI rationalisation of peak margin and to collect the margin associated with risk.
To ensure that there is more than adequate risk coverage of all the market participants, ANMI suggested the regulator that the peak margin can be reduced to a maximum of 50 per cent from the current 75 per cent.
It further said assessed risk for intraday trade is around 25 per cent to 33 per cent and collection of maximum of 50 per cent margin would be more than adequate.
According to the brokers' association, intra-day and end-of-the-day trades are totally different in terms of triggers, period of holding, risk involved and class of investors. Further, intra-day positions create liquidity, volume and depth in the market and helps to bring down impact costs.
Besides, intra-day positions are squared up before the close of market hours and, hence, levy of two day margin is grossly unreasonable.
ANMI, a grouping of over 900 stock brokers across the country, in its submission to SEBI, said trading members will continue to pay 100 per cent margin to the exchange for the transaction done on the bourse.
Out of the 100 per cent margin, maximum of 50 per cent would be collected from the client and the balance would be paid by the members from their capital and without any cross-client funding, it added.
While the exchanges are already ensuring compliance of applicable norms, ANMI said it would be happy to work with SEBI to devise any guidelines to further ensure that members use only their own funds to finance the margin for intraday trades of clients.
It said that client will continue to pay 100 per cent of the end of the margin as currently applicable.
In May, ANMI urged SEBI to reconsider the proposed 100 per cent levy on intraday trade peak margins, as the higher margin will reduce hedging opportunities.