A ton of discussions has been going around recently, concerning the new Margin Pledge rules implemented by SEBI. The new improvement happened on 1st September 2020 after SEBI wouldn’t extend the deadline.
The changes introduced by the market trackers aims to safeguard the interests of investors, bring transparency and keep brokerages from abusing the customer’s securities. These changes came out in February and were at first planned to be implemented from June 1, 2020. The deadline was then extended to August 1, 2020, and from that point to September 1, 2020. While the intermediaries despite everything requested more opportunity to prepare the systems, SEBI said they will not be extending the deadline any further. Pledging functions like some other home loan plan where you utilize your stocks as securities to get a loan, like utilizing an advantage as collateral. Traders and Merchants in the Futures and Options (F&O) segment frequently use pledging to get margin subsidizing from the agent to put resources into huge investments, including sizeable initial investments. A margin is a famous apparatus in the realm of stock trading. Utilizing this tool, investors can put resources into bargains without contributing the full value. While your pledge, your money speculation can be set aside to the hair-style/permissible value of the securities you have utilized as collateral for example on the off chance that you failed to reimburse the losses and debits, the broker may call upon and sell the stocks pledged for the margin to recover the debt. Further, the broker goes about as a custodian for the securities in the margin account yet a period SEBI encountered the objections concerning brokers abusing customer assets and collaterals. The new standards will assist with tending to this problem.
Because of the new margin standards, we may see a decrease in trading volumes in the money segment. This is because SEBI has stopped inordinate leverage exchanges and directed agents to gather higher margins from investors. Besides, investors should hang tight for T+2 days to pledge the recently purchased shares. Further, investors who do active trading may not be impacted a lot. However, Active traders may feel an expansion in their trading costs as they should give higher margins now.
The new standards have become a disputable topic among agents and investors. There are fears that the stock trading cycle may get cumbersome and discourage numerous day trading investors from trading aggressively. Nonetheless, this may make the framework more efficient.
