Securities and Exchange Board of India’s (Sebi) new peak margin regulations’ fourth and final phase will come into effect from September 1.

What is peak margin rule

Under the new peak margin rule, traders will be required to give 100 per cent of the total margin upfront for their trades. In this new norm, intraday traders will have to pay 100 per cent upfront margin instead of 75 per cent upfront margins.

Peak margin concept

The peak margin concept was introduced from December 2020 onwards, wherein members were required to collect 25 percent of the applicable margin from the clients which was increased to 50 percent and at present, 75 percent of the applicable margin is being collected towards the peak margin.

This will further increase to 100 percent from September onwards.

According to the brokers' association, intra-day and end-of-the-day trades are totally different in terms of triggers, period of holding, the risk involved, and a class of investors. Also, intra-day positions create liquidity, volume, and depth in the market and help to bring down impact costs.

Besides, intra-day positions are squared up before the close of market hours and, hence, the levy of a two-day margin is grossly unreasonable.

Out of the 100 percent margin, a maximum of 50 percent would be collected from the client and the balance would be paid by the members from their capital and without any cross-client funding.

Clients will continue to pay 100 percent of the end of the margin as currently applicable.