With additional charges coming into effect from January 1, 2020, the margins of traditional brokerages are expected to take a hit, The Hindu BusinessLine reported. From Wednesday, traders will have to pay additional VaR and extreme loss margin on share transaction even in the cash segment.

BSE defines VaR margin as a margin intended to cover the largest loss that can be encountered on 99 percent of the days (99 percent Value at Risk). About the extreme loss margin, the bourse says, it "replaces the terms ‘exposure limits’ and ‘second line of defence’ that have been used hitherto. It covers the expected loss in situations that go beyond those envisaged in the 99 percent value at risk estimates used in the VaR margin."

The combined value of the two margins add up to anywhere between 15 and 40 percent of a trade’s total value.

While the new norms will likely have a negative effect on the margins of traditional brokerages, new-age brokerage houses like Zerodha, I-Sec, and 5paisa will be at an advantage, The Hindu BusinessLine report said.

First Published:Jan 1, 2020 12:10 PM IST