Peak Margin is the minimum margin that MUST be collected by brokers from their clients in advance of placing any intraday / delivery order in the Cash and derivatives segment. This aims to curb the excessive leverage for intraday and derivatives positions. Clearing corporations will randomly take 4 snapshots at predefined time windows for arriving at such peak margin requirements on open positions during the day. Highest of the margin requirement from these 4 snapshots will be the Peak Margin.
Daily peak margin obligation of the client will be compared with his/her margin available with the broker and the higher
shortfall in collection of margin
obligation shall be considered for levying of penalty as per the
extant framework, as per SEBI's circular.
Who is liable to pay the penalty on the peak margin shortfall? Broker is liable for both reporting the
shortfall in collection of peak
margin and pay penalty on such shortfall. The penalty is in range of 0.5% to 5% of the shortfall
amount on a daily basis.
In the second phase of peak
margin brokers need to collect 50% margin from their customers. In short, if a trader needs
to take up a position of Rs 1 lac, he will need to deposit Rs 50 thousand as
margin with his broker. Till last week, the trader had to deposit 25 percent of
the trade value as margin.
From December 1, 2020, SEBI introduced the concept of
peak margin reporting, in which stockbrokers have to calculate margins based on
the intraday peak position, not just the end-of-the-day positions. To arrive at
an intraday peak position margin, clearing corporations have to take at least
four snapshots randomly during the day.
SEBI has now mandated all the brokers to report the
margins multiple times during the day. This is to ensure that all leveraged
trades are backed by sufficient margins.
The number of times the brokers need to send the margins
in a day (at least four snapshots) is decided by the clearing corporation. The
highest margin is the peak margin of the day.
This is part of the phased adoption over
the next 6 months each and full adoption is expected to happen by September 1,
2021.
Phase 1 (Dec 2020-Feb 2021) – The client should have 25%
of the peak margin available with the broker.
Phase 2 (Mar 2021-May 2021) – The client should have 50%
of the peak margin available with the broker.
Phase 3 (Jun 2021-Aug 2021) – In the third phase, SEBI
has said that the client should have 75% of the peak margin.
Phase 4 (Sep 2021 onwards) – By Sep 2021, clients should
have 100% of the peak margin obligation available with the broker during the
day.