The Securities and Exchange Board of India (SEBI) has tweaked the margining framework for stocks in the cash and derivatives segment.
Margin refers to the minimum fund — in cash or security form — that an investor needs to pay upfront before executing a trade.
“With a view to keeping up pace with the changing market dynamics and to bring more efficiency in the risk management framework, a comprehensive review of the margin framework was done in consultation with the Risk Management Review Committee (RMRC) of SEBI,” the regulator said in a stated a SEBI circular issued on Monday.
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As part of the review, the capital markets regulator has divided stocks in the cash segment into three categories based on liquidity to ascertain the so-called value at risk (VaR) margin.
Further, the extreme loss margin has been fixed at 3.5% for any stock, and 2% for exchange traded funds (ETFs) that track broad-based market indices, and does not include ETFs which track sectoral indices. In the derivatives segment, the regulator has tweaked the methodology for parameters like volatility calculation, calendar spread charge, extreme loss margin and price scan range, among other things.
The regulator has also recommended additional margin for highly volatile stocks.
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