Margin Trading Facility and Securities Lending and Borrowing
Summary
This circular modifies the regulatory framework for Margin Trading Facility and Securities Lending and Borrowing based on SMAC recommendations. It expands eligible securities for margin trading to include IPO offerings meeting derivatives segment conditions and accepts fixed deposits as cash equivalents. Additionally, it restricts Approved Intermediaries in the Securities Lending Scheme to Clearing Corporations/Houses of Stock Exchanges.
Text
In addition to the Group 1 securities... all the securities which are offered in the Initial Public Offerings (IPOs) and which meet the conditions for inclusion in the derivatives segment of the Stock Exchanges would be eligible for Margin Trading Facility.
Fixed deposits with banks and Bank Guarantees shall be treated as cash equivalent and shall be considered as acceptable form of initial and maintenance margins for the purpose of availing the Margin Trading Facility.
Before providing Margin Trading Facility to a client who has already availed of Margin Trading Facility from another broker, the broker is required to obtain a no-objection certificate in writing from the other broker.
The other broker shall be required to convey his objection, if any, in writing, within a period of 21 days from the date of receipt of query from the broker, failing which the broker would be free to proceed with providing Margin Trading Facility to the client.
Only the Clearing Corporation/House of the Stock Exchanges shall be permitted to act as Approved Intermediaries (AIs) under the Securities Lending Scheme (SLS) to borrow and lend securities to meet the settlement shortages.
In order to enable lending of idle securities by investors, the Clearing Corporation/House may borrow securities from any person through his account with the depository participant and select the borrower on a random basis.
The Clearing Corporation/House of the Stock Exchanges shall work out a mechanism to borrow securities at a market determined rate.
make necessary amendments to the relevant bye-laws, rules, regulations and listing agreement for the implementation of the above decision immediately.
bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminate the same on the website.
communicate to SEBI, the status of the implementation of the provisions of this circular in Section II, item no. 13 of the Monthly Development Report.
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 and to promote the development of, and to regulate the securities market.
Source: SecMarx — Margin Trading Facility and Securities Lending and Borrowing. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.