New Sebi rule to hit intraday trading hard

New Delhi: In what could mark the end of intraday trading, which accounts for 90 per cent turnover in the stock markets, markets regulator Sebi has put out a circular on upfront collection of margins from clients in the cash and derivatives segment.

According to brokerage estimates, intraday margins will go. This could result in huge reduction in intraday turnover which is almost 90 per cent of all turnovers. This is because an excess intraday margin provided could result in margin penalty.

Sebi has introduced the concept of peak margin reporting. The clearing corporations shall send four snapshots during the day for identifying the margin requirements for clients across the day.

Margin penalty to be based on a higher peak margin reported during the day based on snapshot files or end of day margin as per current practice. "This practically means, no more intraday leverage," said Jimeet Modi, founder and CEO, Samco Group.

This measure will be rolled out effective from December 1, 2020. There will be a phased adoption over three phases of three months each and full adoption by September 1, 2021.

Nitin Kamath of Zerodha tweeted: "Today's Sebi circular says that all brokerage firms have to stop intraday leverage products by August 2021 in a phased manner".