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SEBI defers 50:50 margins rules for F&Os in new circular

SEBI defers 50:50-margins rules for F&Os in new circular

SEBI defers 50:50-margins rules for F&Os in new circular
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By Moneycontrol News Nov 23, 2021 9:15:40 PM IST (Updated)

From February 28, 2022, to trade in the derivatives market, an investor will need to hold 50 percent of the value in her account as margin.

Securities and Exchange Board of India (SEBI) has postponed the implementation of the 50 percent cash-margin rule for futures and options (F&O) traders and credit-default swaps (CDS) segment to February 28, 2022, from the earlier deadline of December 1, 2021.

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The regulator cited investor interest, and market regulation and development as reasons for the deferment, in its recently issued circular.
Earlier rules allowed investors to cover their margins entirely with their securities. But, from 2022, they will need to keep 50 percent of the value in cash in their account as margins to trade in these segments.
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This is largely to protect investors from massive swings, and the high risks and perils of leverage, during times of extreme market volatility, stress and a bull run.
However, many have warned against the flipside of this regulation. They say it can lead to reduced liquidity in the market and can even upend the market's fundamental price-discovery mechanism. Both outcomes could significantly impact market volumes, said many brokers and traders.
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