Trading On margin

The maximum margin rule comes into effect from today. Details here

Stock Exchange : The final stage of the maximum margin rules will take effect from today. In this new standard, intraday traders will have to pay an initial margin of 100% instead of 75% of the initial margins. According to market experts, it is necessary to make appropriate adjustments to this new rule, otherwise it could create chaos, problems and disruption for market participants including traders, investors and brokers. They said the fourth phase of this maximum margin rule is difficult for intraday traders, workers, and stock brokers as they will need to prepare their clients for a late release of margins.

Speaking on the maximum margin rule and its impact on workers, intraday traders and brokerage activities; Avinash Gorakshkar, Head of Research at Profitmart Securities, said, “Market participants win arbitrage through exchanges, which will be difficult after implementing a 100% initial margin payment system. He went on to add that following the 100 percent initial margin money payment standards for intraday traders, one can expect volume to decline for some time.

Welcoming the decision to implement maximum margin rules; Saurabh Jain, Assistant Vice President – Research at SMC Global Securities said: “These brokers, traders and dealers who have better backgrounds, they are mentally prepared and therefore this new standard will not have much impact on them because the first three prongs of this rule are already in effect because the first step of this maximum margin rule was implemented in December 2020 with an initial margin payout rule of 25%. Later it was increased at 50% and 75% in the next two steps of this maximum margin rule., traders and brokers were well aware of what was written on the wall. “

On whether the 100% initial margin payout rule works as a catalyst for illegal trading (dabba trading), as some brokers may trade on the brokers account using a stop loss to the extent of the money they paid to their broker; Avinash Gorakshkar of Profitmart Securities said: “It is very difficult to confirm this as the regulations have become more stringent. Therefore, dabba trading is unlikely to increase. But yes ! This will make intraday trading more difficult for future traders. He said the increasing cost of impact and decreasing liquidity cannot be denied, but traders and workers must adapt to the new standard, as the maximum margin rule aims to reduce their risk. related to the fault.

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