The Securities and Exchange Board of India (SEBI) has issued a framework requiring clearing corporations to waive margin collection on subsequent cash market buy and sell positions backed by accepted early pay-in (EPI) of securities. The waiver applies where a client has a net sell obligation in a settlement and the clearing corporation has accepted EPI for the securities sold. Clearing corporations must apply the relief in real time to margins collected from trading members and clearing members. For positions taken on the same trade date, the available EPI benefit is capped at the lower of the value of securities delivered through EPI and the value of securities sold. If the client squares off the sale position underlying the benefit, the clearing corporation must remove the EPI value and block any resulting client margin shortfall against the trading member’s or clearing member’s proprietary collateral. This removal requirement does not apply to trade-for-trade securities, which settle on a gross basis. Trading members must ensure their risk management systems permit clients to square off positions backed by EPI or take new positions only when the required client margins are available with the member. Clearing corporations must make the necessary rule and system changes to implement the framework.
Securities and Exchange Board of India introduces margin waiver for subsequent cash market trades backed by early pay-in
The Securities and Exchange Board of India has introduced a framework for real-time margin waivers on subsequent cash market trades where a client has a net sell obligation and accepted early pay-in of the securities sold. Relief for positions taken on the same trade date is capped at the lower of the EPI value and the value of securities sold. Squaring off the underlying sale removes the benefit and requires any resulting margin shortfall to be blocked against member proprietary collateral, except for trade-for-trade securities.