Sep 1, 2021, fresh month starts with a challenge i.e. introduction of Peak Margin rules by SEBI

Time for a 🧵

Lets demystify the Peak Margin rules and try to find solutions for the option sellers!

Peak Margin by SEBI:
• 100% upfront margin for intraday trades in the derivative segment
• Effectively MIS orders = NRML orders, as both will attract same margin in the derivative segment
• Minimum margin for equity intraday trades will be 20% of trade value i.e. 5X leverage

How things used to operate erstwhile?
• Until last year there were no standardization of leverage
• Brokerage firms used to offer their clients intraday leverage of 5x, 10, 15x, 20x etc. as margin reporting was done on EoD basis

• Brokerage firms were allowing customers to take intraday positions with margins far lesser than required via products like MIS, BO, CO, etc. as the positions used to get squared off before the trading hours

• Eg: If 1 lot of Nifty futures require (SPAN + exposure of) Rs. 1.1L, brokerage houses would allow to trade with just 20-30% of this amount i.e Rs. 33k