Angry tweets with #SEBIAgainstRetail spike as India’s market regulator’s new rules on intraday trading kick in today
SEBIhad announced a 100% upfront margin for trading in its new peak margin norms.
- Basically, if you want to buy stocks worth ₹1 lakh of Reliance Industries, you must have about ₹16,000 in your account. This is because the value at risk margin for the stock is 16.11%.
- Hashtag #notradingday was trending on Twitter on September 1 as SEBI new rules on margin disappointed investors.
It seems to be a bad day for stock market traders as the market regulator’s new margin rule will come into effect from Wednesday, September 1. The anger was visible among investors on Twitter as tweets with hashtag #SEBIAgainstRetailers were trending.
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So what exactly are these new rules by the Securities and Exchange Board of India (SEBI) that have riled up investors?
According to new margin norms, traders taking bets on futures & options markets will have to keep 100% margin in their bank accounts to proceed with the trade. Until now, only 75% of the total margin was required. This 100% margin is based on the value at risk (VaR) margin defined by exchanges for each stock. VaR margin is different for each stock and is higher for penny stocks.
AdvertisementMargin is a specific amount one needs to have for hedging stocks.
For example: VaR margin is 16.11% for Reliance Industries and is 100% for Reliance Power (margin is higher here because it is considered a penny stock, which witnesses risky bets by traders). Now, a broker has to ensure this entire margin amount is provided by the client before trading or else a penalty will be charged. Earlier, only 75% of this margin amount was required.
Traders showed their disappointment around the new margin norms on Twitter as #notradingday hashtag was trending on the microblogging website.
This new rule affects the stock traders, as now they will have to shell out more money to bet during intraday and futures markets. Further, penalties will be charged on traders if the margins are not maintained during the trading session.
The idea by SEBI is to control the leverage being taken by the traders and thereby reducing risks. This is in regard to investors taking risky bets more than their margins.
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