Allowing securities funded through cash collateral as maintenance margin for Margin Trading Facility (MTF)
Summary
SEBI amends the Master Circular to allow securities funded through cash collateral to be considered as maintenance margin for Margin Trading Facility. The regulation mandates separate identification of collateral and funded stocks, prohibiting comingling for funding amount computation. Additionally, a new clause requires such funded stocks to be Group 1 securities with specific margin applicability.
Text
The requirement under Chapter 1 at Para 4.3.3.1 of the Master Circular stands amended to allow securities funded through cash collateral to be considered as maintenance margin for MTF, subject to separate identification and no comingling.
The stocks or units of Equity ETFs deposited as collateral and those purchased under MTF shall be identifiable separately and no comingming shall be permitted for the purpose of computing funding amount.
Cash collateral collected from clients and given to the Clearing Corporation can be considered as maintenance margin to the extent of securities received from CC against such cash collateral, provided shares are pledged in favor of the trading member.
Incase the funded stock is considered towards maintenance margin to the extent of cash collateral provided by the client, the Trading Members shall ensure that the funded stock considered is under Group 1 securities.
The applicable margin shall be VaR + 5 times the Extreme Loss Margin, irrespective of whether the funded stock is available in F&O segment or not.
The extant Clause 4.8.1 is modified to allow reporting of exposure under Margin Trading Facility by the Trading Members on or before 6:00 PM on T+1 day.
Stock Exchanges are advised to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately.
Stock Exchanges must bring the provisions of this circular to the notice of their members and disseminate the same on their website.
This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities market.
The circular shall come into effect from October 01, 2024.
Source: SecMarx — Allowing securities funded through cash collateral as maintenance margin for Margin Trading Facility (MTF). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.