SEBI’s circular, released on Thursday, removes the requirement for clearing corporations to collect margins from trading and clearing members on clients’ subsequent positions in the cash segment, provided the early pay‑in (EPI) for the sold securities has been successfully accepted.
The relief applies only when a client holds a net sell obligation in settlement and the EPI request has cleared. In such cases, the clearing corporation will compute the available EPI value on the trade date, choosing the lower of the securities’ EPI value or the sold securities’ value.
If the client takes a new position on the same day under the EPI benefit, the clearing corporation will adjust the client’s margin by subtracting the eligible EPI value. However, should the client close the sale position that triggered the EPI, the EPI value is withdrawn and any resulting shortfall is covered by the proprietary collateral of the trading or clearing member.
The circular explicitly excludes trade‑for‑trade securities, which settle on a gross basis. SEBI also directed trading members to ensure their risk‑management systems allow clients to square off positions or open fresh ones only when the requisite margins are available.
The decision follows proposals from the Broker ISF and recommendations from SEBI’s Risk Management Review Committee. By eliminating margin collection on eligible positions, the regulator aims to reduce the margin‑call burden for net sellers, potentially enhancing liquidity and lowering the cost of trading in the cash segment.
Market participants are advised to review their risk‑management protocols to accommodate the new framework. The move is anticipated to smooth settlement dynamics, though its full impact will be visible once trading volumes adjust to the updated margin regime.