New SEBI Rules on margin and intraday trading | Fusion - WeRIndia

New SEBI Rules on margin and intraday trading

New SEBI Rules on margin and intraday trading

The new rules of the Securities and Exchange Board of India (SEBI) regarding stock trading came into force from September 1. These rules will be implemented from September 1 to December 1 phase-wise.

SEBI announced new norms in February to bring transparency and prevent brokerage firms misusing the securities of clients. While the new rules were supposed to come into force from June 1, due to coronavirus pandemic, the date was extended to August 1 and then to September 1.

The power of attorney (PoA) from a client was enough for the brokers to make transactions on their behalf in the past. But this led to the misuse of funds as they were used to provide margin to other clients. But, the new norms aim to control the misuse of clients’ funds.

Here are the new norms:

  • Investors can directly pledge their stock to the clearing corporation as the stock will remain in their Demat accounts. Besides, they can enjoy the corporate benefits on their shares.
  • Brokerage firms should have to collect margins from investors upfront to buy any shares. If the investors do not have enough margin, they will have to pay a penalty.
  • Collecting the upfront margin was not mandatory in the past. But as per the new norms, it is essential. Investors have to pay at least 30 per cent margin upfront to avail margin loan.
  • If an investor wants to avail margin, they will have to create margin pledge.
  • The PoA cannot be used for pledging anymore. Hence, no POA is assigned to brokers as it was used to do in the past.
  • So far, investors are using profit from intraday trades for further trading on the same day. But, it will not be possible with new norms. Investors will be able to use the profits only after T+2 days when they receive the delivery of shares in their account.

Image by Csaba Nagy from Pixabay (Free for commercial use)

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