Peak Margin Trading Rules: Here's What You Should Know

The last phase of peak margin rules has become effective from today (September 1, 2021). As per the new rules, intra-day traders will need to pay 100 percent upfront margin as against 75% upfront margin. As per the market experts, market participants including traders, brokers and investors will face trouble if they do not adjust to the new norm.

According to the market experts, there is need for proper adjustments to this new rule otherwise it may create chaos, trouble and disturbance to the market participants, which include traders, investors and brokers. They said that fourth phase of this peak margin rule is challenging for intraday traders, jobers and stock brokers as they will have to prepare their clients for late margin release.

Speaking on the peak margin rule and its impact on jobers, intraday traders and broking business; Avinash Gorakshkar, Head of Research at Profitmart Securities said, "Market participants earn arbitrage through exchanges, which will be difficult after the implementation of 100 per cent upfront margin payment system." The resultant ruling may impact the trading volume for some time.
"Those brokers, traders and jobbers who have a better track record, they are mentally prepared and hence this new norm is not going to impact them much because first three leg of this rule has already in operation as first leg of this peak margin rule was implemented in December 2020 with 25 per cent upfront margin money payment rule. Later on it was increased to 50 per cent and 75 per cent in next two legs of this peak margin rule. So, traders and brokers were well aware about what's writing on the wall", said Saurabh Jain, AVP - Research at SMC Global.

There can also be a case or speculations are being made that the 100% margin requirement may act as a trigger for illegal or dabba trading as some of the jobbers may begin trading in brokers' account using stop loss to the extent they have made payment to their respective brokerage firms. Also, the new ruling is seen to make intra-day trading much tougher and difficult.

The peak margin rule aimed at increasing the risk to traders and jobbers owing to default may also see a decrease in liquidity and at the same time impact cost shall rise.

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