The new peak margin rules which were implemented on December 1 seem to have had limited impact on the daily share trading volumes on the exchanges.

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With effect from December 1, 2020, market regulator Securities & Exchange Board of India (Sebi) mandated collection of upfront margin from clients equal to the higher of peak margin or EOD (End of the day) margin in intraday as well as delivery. From the said date, brokers moved away from the EOD position to intraday peak margin for calculating the margin requirement.

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The new norms have moderately impacted the average daily turnover value (ADTV) on the NSE and analysts are of the view that the ongoing market rally have attracted more investors towards stock market.

In December 2020, NSE retail / overall cash ADTV declined 2.5 percent / 10 percent MoM while NSE retail / overall derivative turnover changed -6.5 percent / +3 percent MoM.

Source | ICICI Securities

“The brokers are providing margins to clients based on the current tight margin rules implemented by Sebi, but with a rising market trend they hope to make the most of the ongoing rally in the markets which is largely driven by heavy FII inflows and massive liquidity,” said Avinash Gorakshakar, Director – Research, Profitmart Securities.

Gorakshakar also attributed the high volumes to brokerages continuing to offer margin leverage to clients in an effort to sustain their revenue growth and also to capitalize on the bullish trend in the market.

However, experts believe that the volumes will further be impacted as the upfront margin requirement increases over time.

The Peak margin rule is being implemented in the phased manner mentioned below:

Phase 1: 25 percent of the upfront margin to be available before the trade is being executed from December 1, 2020, to February 28, 2021.

Phase 2: 50 percent of the upfront margin to be available before the trade is being executed from March 1, 2021 to May 31, 2021.

Phase 3: 75 percent of the upfront margin to be available before the trade is being executed from June 1, 2021 to August 31, 2021.

Phase 4: 100 percent of the upfront margin to be available before the trade is being executed from September 1, 2021.

Earlier, margins were collected upfront and calculated on the basis of the end of day positions. The broker funded intraday positions of the clients as long as he brings the outstanding by the end of the day to below what they have already deposited as margin by the end of the day.