SEBI allows cross margin across cash and derivatives

Mumbai, May 6 (UNI) The Securities and Exchange Board of India (SEBI) has allowed cross margining across cash and derivatives markets, so that investors can utilise their margins better.

However, initially this facility will be available only for institutional traders.

In another positive move to help the institutional investors, SEBI has granted permission to swap corresponding margins between cash and debts market for better utilisation of their money and to cut off their occasional heavy losses.

Earlier, SEBI had extended the facility of direct market access for the institutional investors.

In this regard, yesterday SEBI had issued a circular to all stock exchanges describing the norms and guidelines to be followed by the investors and market operators.

In order to improve the efficiency of the use of the margin capital by market participants and as an initial step towards cross margining across cash and derivatives markets, margins shall be levied on cash market positions which have off-setting stock futures positions in the derivatives market, a release said.

Describing the cross-margin facility, SEBI said Value at Risk (VaR) margin will not be levied on the cash market position, but, it will be only to the extent of the off-setting stock futures market position.

However, it also stated that no cross-margin benefit would be allowed in near month stock futures positions before three days of expiry and ''Extreme Loss Margin'' and ''Mark to Market Margin'' would be charged as per before on the entire cash market position, not future market while SEBI made no changes in the Future&Option position.

As per SEBI guidelines, it means, if any institutional investor is buying a stock that already has a short position in the futures segment would need not to pay margin for both cash and debts.

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