SEBI's cross-margin not good for BSE: Market players

The new margining system would allow each client’s margin kept with one segment of a particular bourse, say the cash segment, to be used to meet the margin requirement in the other segment, that is derivatives, and vice versa. However, the new system does not allow cross margining at the broker level and also limits the use of this facility to derivatives contracts only for a particular month. Margin is the collateral a trader or an investor has to keep with the exchange while trading. At any point of time, the amount of margin depends on the trading value as well as several other factors associated with overall market risks. Margins could be kept in the form of cash, fixed deposits, bank guarantees , shares and other forms of assets as specified by the existing rules. On Tuesday, SEBI said to improve the efficiency of the margin capital’s use by market participants, it has now been decided to revise the existing facility of cross margining and to extend it across cash and derivatives segments to all categories of market participants. Among other rules, the positions of clients in both the cash and derivatives segments, to the extent they offset each other, shall be considered for the purpose of cross margining, a SEBI release noted. Brokers and dealers said the new system was a welcome move by the regulator that the broking community was looking forward to for a long time but warned that this could also lead to a rise in speculative trading. ‘‘ Some cash could be freed from the system which could be used to profit by trading.