SEBI Allows Securities Funded by Cash Collateral to Be Considered as Maintenance Margin for Margin Trading Facility

Circular No. SEBI/HO/MRD/MRD-PoD-2/P/CIR/2024/118; Dated: 11.09.2024

SEBI has allowed securities funded by cash collateral to be considered as maintenance margin for Margin Trading Facility (MTF) to promote ease of doing business. This move helps to ease the burden of providing additional collateral towards the maintenance margin for the margin trading facility.

This change came after SEBI received representations from market participants through the Industry Standards Forum (ISF) to relax the margin trading requirements.

Further, stocks or units of equity exchange-traded funds (ETFs) deposited as collateral with brokers and those purchased using margin trading must be kept separate. These two types should not be mixed to calculate the funding amount.

In case, the broker has collected cash collateral from the client in the form of a margin for availing margin trading facility and the Trading Member has given the said cash collateral to the Clearing Corporation (CC) towards the settlement obligation of the said client, then the same can be considered as maintenance margin. The circular shall come into effect from October 1, 2024.

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