SEBI has imposed a new margin rules for investors specially in cash segment (Equity). Most of the traders, investors and stockbrokers still in confused for the reason of taking such action. No doubt SEBI is a godfather of stock exchange, who takes a decisive step for the welfare of stock market investment, but the sudden margin call in equity market was indigestible for all.
SEBI new margin rules not only restricting investors to buy and sell in cash stocks but also hampering the broker business indirectly. The more you put diminution the more you limiting volume in capital market. Pledging shares to avail margin was a good initiative for safeguard of investors but additional margin requirement which has been imposed recently need to be revised. So a small retail investor can do transactions in his/her demat account freely.
The most popular and traditional trading was BTST which means Buy today Sell tomorrow. A small investor for short term gains used to buy and sell stocks within limited period of time for beneficial. But that has been completely dried up, reasons one need to keep additional 20% margin in his/her ledger to buy and sell stocks. Whether you fully paid for the stocks or you purchase stocks in limit. During the day of implementation small retail investors has stopped making transactions as they are clueless behind the reasons.
As per the complaint comes from the few brokers regarding the margin rules on behalf of client, ” Why should we keep additional money to sell our full paid stocks”. At what purpose money would be kept idle at broker trading account. Who will be responsible for the idle money, will SEBI give interest on keeping idle money to sell stocks. These are the few quotes which dislikes by investors, India is the first country for taking such initiatives. Now SEBI will say these margin is for safeguard of Stock Brokers, but how many brokers have suffered loss in the cash segment transactions whether it is intraday or Delivery. Out of 100 there might be a case of less than 1% where broker faces loss from such client.
In derivatives segment profit and loss is unlimited, here stockbrokers Risk Management System team need to be alert in managing risk for clients. There should be a system options of square off if risk goes above 80% of margin where they need to call client for margin or position will be square off automatically by the system once the risks comes nearer the bracket. Karvy stock broking ltd and few other brokers who shut operations failing to give client payout might be the reason mentioned above. Or the stocks has been pledged from the pool account and has been withdrawn money from bank for their own beneficial.
Well, the pledging shares for margin benefit was acceptable by all, but selling stocks from demat one need to have 20% margin was not acceptable. SEBI should think of this and should revise in further hearings. And the penalty for shortfall in margin was the worst decision which in results people will look for other alternatives investment rather than stock market. Now the decision is all depend upon the SEBI whether to remove penalty and margin rules or to go continue with their terms.