SEBI published a guideline to verify upfront collection of margins

Securities and Exchange Board of India published a framework to enable verification of upfront collection of margins from clients in cash and derivatives segments on Monday in a circular. The framework will come into effect from December 1, 2020, said SEBI. The market regulator has reiterated that the applicable upfront margins will be collected from the clients in advance of the trade.

Clearing corporations will send a minimum of four snapshots of client wise margin requirement to the trading member (TM) or clearing member (CM). it is done to inform them to know the intra-day margin requirement per client in each segment said SEBI in a circular released on Monday.

Clearing corporation depending on market timings subject to a minimum of four snapshots in a day may decide the number of times snapshots need to be sent in a day. The snapshots would be randomly taken in pre-defined time windows. For commodity derivatives segment, the last snapshot for commodity derivatives will be generated at 5 PM, said SEBI.

The client wise margin file provided by the clearing corporations to trading or clearing member will contain the end of the day (EOD) margin requirements of the client as well as the peak margin requirement of the client, across each of the intra-day snapshots. The member will need to report the margin collected from each client, as EOD and peak margin collected during the day, during a manner prescribed by the SEBI.

EOD margin obligation of the client is going to be compared with the respective client margin available with the TM/CM at EOD and peak margin obligation of the client, across the snapshots, will be compared with respective client peak margin available with the TM/CM during the day. About penalty, SEBI said higher of the shortfall in collection of the margin obligations at the two prescribed manner will be considered for levying of fine.