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

CPI inflation hits 6-month high of 2.92% in April

India's retail inflation based on Consumer Price Index (CPI) continued northward journey for third straight month and inched up to a 6-month high of 2.92% in April 2019 due to a spike in food prices, including......

Indian economy to grow at 7% range in current fiscal: Subramanian

Chief Economic Advisor (CEA) Krishnamurthy V. Subramanian has said  that the Indian economy would grow at 7% range in the current financial year (FY20) powered by the effects of the strong structural......

Banks take 57% haircut in 94 cases resolved in FY19: ASSOCHAM-CRISIL study

A joint study carried out by the industry body Associated Chambers of Commerce & Industry of India (ASSOCHAM) and rating agency CRISIL stated that banks have taken a huge 57% haircut in the 94......

Top News

View all news

SRF, NIIT Technologies and United Bank of India to see some action today

SRF has entered into a definitive agreement to sell its Engineering Plastics Business to DSM, the Life Sciences and Materials Sciences Company in an all-cash transaction, amounting to Rs 320 crore. The......

NIIT Technologies concludes sale of 88.99% stake in ESRI India Technologies

NIIT Technologies has concluded the sale of 88.99% equity shares in ESRI India Technologies, India to Environment Systems Research Institute Inc., USA. Consequent to above sale, ESRI India Technologies,......

United Bank of India to raise Rs 1,500 crore by various means

United Bank of India has received approval to raise equity capital not exceeding Rs 1,500 crore in one or more tranches during the financial year by way of Qualified Institutions Placement, Public Issue,......