Collect Margins In Cash Market By T+1 Settlement Day: Sebi To Brokers

The capital markets regulator the Securities and Exchange Board of India (Sebi) has directed brokers to collect margins from clients by the T+1 settlement day in the cash market. This is applicable to all margins except upfront value at risk (VaR) and extreme loss margin (ELM). Earlier, brokers were allowed up to T+2 days to collect these margins. T+1 settlement cycle in the cash market was fully implemented across all listed scrips since January 27, 2023.

The regulator, in a circular dated April 28, changed the margin collection timeline to align with the shift from a T+2 to a T+1 settlement cycle and to strengthen risk management.

What The Amended Framework Says

In line with this change, Sebi has amended the Master Circular for Stock Brokers dated August 9, 2024. According to the amended rule, upfront VaR margins and ELM will continue to be mandatorily collected in advance of the trade, as has been the case so far.

The amended rule states that the grace period given to brokers up to the settlement day is intended only to accommodate “practical difficulties” they may face while collecting margins. The regulator also clarified that the grace period to collect these margins is only for the purpose of avoiding penalties and it must not be “construed that clients have been allowed time till settlement day to pay margin due from them.”

Further, the amended rule states that if the client successfully completes pay-in by the settlement day, the collection of other margins will be considered fulfilled, and no penalty will be levied for non-collection.

However, in case, if clients fail to make pay-in and trading and clearing members do not collect other margins from the client by the settlement day, it will attract penalties for the brokers as applicable.

Sebi has thus instructed stock exchanges and clearing corporations to amend their relevant bylaws, rules, and regulations to implement these changes. The regulator also directed them to inform all market participants and publish the circular on their websites.