Breaking News

You are here » Indian-Commodity  :  Economy  :  SEBI issues norms on margin trading facility for stock brokers


SEBI issues norms on margin trading facility for stock brokers

Acting on the request from market participants for review of margin trading facility (MTF) to enable greater participation, the capital market regulator, Securities and Exchange Board of India (SEBI) has issued a circular specifying the comprehensive review of MTF framework including disclosure norms, leverage & exposure limits and eligibility requirements for stock brokers to provide it to clients.

As per the circular, the corporate brokers with a net worth of at least Rs 3 crore will be eligible to offer MTF to their clients and the net worth for the purpose of MTF shall be as specified in SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992. Besides, the stock brokers would need to submit a half-yearly certificate from an auditor confirming the net worth to the stock exchange. The SEBI further noted that at any point of time, the total indebtedness of a stock broker shall not exceed 5 times of its net worth.

The circular though mentioned that the brokers may use their own funds or borrow from scheduled commercial banks or Non Banking Financial Companies (NBFCs) regulated by Reserve Bank of India for providing MTF, while they are not allowed to borrow funds from any other source. Also, the total exposure of the broker towards MTF should not exceed the borrowed funds and 50 per cent of his net worth. Brokers have to ensure that the exposure to a single client does not exceed 10 per cent of its "total exposure". Besides, exposure towards stocks purchased under MTF and collateral kept in the form of stocks need to be well diversified.

Sebi has further guided that in order to avail margin trading facility, initial margin required for Group I stocks available for trading in the F & O Segment will be VaR in addition to three times of applicable ELM, while for Group I stocks other than F&O stocks, shall be the VaR in addition to five times of applicable ELM. The initial margin payable by the client to the  Stock Broker shall be in the form of cash, cash equivalent or Group I equity shares, with appropriate hair cut as specified  in  SEBI circular dated December 16, 2016.

Related News

View all news

Number of people filing tax returns may double during 5 years of present government: Jaitley

Finance Minister Arun Jaitley has said that the number of people filing tax returns in India is likely to double to 7.6 crore during 5 years of present government due to initiatives like rationalisation......

Cabinet may soon approve proposed new industrial policy: Prabhu

Commerce and Industry Minister Suresh Prabhu has said the Union Cabinet may soon approve the new industrial policy that aims at promoting manufacturing, attracting investments and creating jobs. He also......

India's manufacturing sector outlook to remain positive for Q2FY19: FICCI

With higher production in manufacturing, Federation of Indian Chambers of Commerce and Industry (FICCI) in its latest quarterly survey has stated that the outlook for India's manufacturing sector is positive......

Top News

View all news

Hero MotoCorp achieves best ever sales performance in Q2 FY19

Hero MotoCorp has achieved its best-ever sales performance for the second quarter of any financial year, selling 21,34,051 units of two-wheelers in Q2 FY19.For the period April-September 2018, Hero MotoCorp......

Mahindra CIE Automotive reports 74% rise in Q3 net profit

Mahindra CIE Automotive has reported results for third quarter ended September 30, 2018.The company has reported 73.80% rise in its net profit at Rs 42.58 crore for the quarter under review as compared......

Infosys crosses $2 billion large deal signings in Q2 FY19

Infosys has crossed $2 billion large deal signings in Q2 FY19. Besides, the company's digital revenues stood at $905 million in Q2 FY19 (31.0% of total revenues), year-on-year growth of 33.5% and sequential......