SEBI has announced new timelines for margin collection from the traders on Monday, 28 April 2025. The market watchdog has asked the brokers to collect margins by the end of the settlement day, that is, T+1 day. The only exception to this new guideline is for Value at Risk margin (VaR) and Extreme Loss Margin (ELM). For the VaR and ELM, the brokers need to collect them upfront.
As this new timeline will be implemented immediately, let’s understand how this is going to impact traders and investors.
Why did SEBI announce a new timeline for margin collection?
The settlement cycle for trading has shifted from T+2 days to T+1 day over two years. Now, the timeline for the collection of the margin wasn’t altered according to the settlement cycle. This is why SEBI has now altered the timeline to align the margin collection with the settlement cycle. It was in January 2023, when the settlement period for trading was reduced to T+1 day from T+2 days across all scrips in the cash market.
As per the SEBI Circular, they have received representations from the Brokers’ Industry Standards Forum (ISF), where the brokers raised concerns over the collection period, and thus, to improve the risk management framework for the system, SEBI is introducing this new timeline for managing risks involved with the collection of margins as well. The clearing members and trading members both need to follow the new guidelines.
How will this affect the traders/ investors?
While this may sound like clients have to pay the margins earlier, but anyway they have to pay the margins otherwise, penalties will be levied and other consequences. So, in a way, it is better as the margin collection and settlement cycle will be in a sync now.
SEBI also said that the timeline is by the end of the Settlement Day or T+1, just to assist the traders to pay their margins without attracting any penalties. However, they must take this seriously and not think of it as an extension. In case the clients fail to pay the margin by the end of the settlement day, then penalties will be there.
Wrapping up
Collection of margins is crucial for the brokerage houses and the exchanges, and even for the traders. Paying the margins within the deadline is important and avoiding paying penalties. So, as the timeline has changed, see the availability of your funds, and plan your trades accordingly.
Source: CNBC TV18
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