Sebi chairman Ajay Tyagi on Thursday said that peak margin norms give peace of mind that things would not go wrong in the market, and the interest of small investors will be protected.
Speaking at the inaugural session of the 12th edition of the Financial Markets Summit, organised by the Confederation of Indian Industry (CII), Tyagi said that there has been a huge increase in activity by individual investors in the market, and investors' money should only be used for their trades, not for the broker.
The fourth and final phase of the regulator's peak margin norms came into effect from September 1, 2021. It mandates equity and commodity brokers to collect 100 percent of the total margin required for initiating intraday positions.
He also stressed the need to further reduce the settlement time to ensure that margin money is kept for less time. The T+1 settlement cycle is in the interest of all market participants, he said.
The capital market regulator recently introduced an optional ‘trade day plus one’ or ‘T+1’ cycle of settlements for equities, in which once a trade is executed, the settlement will be carried out within one day as against the current system of T+2. The T+1 system will come into force on January 1, 2022.
Batting for T+1 , Tyagi said the new settlement system ensures that investors get funds in a quicker manner. He said T+1 is not expected to affect liquidity.
“T+3 settlement cycle started in 2003 and there has been a lot of advances in technology since then. T+1 ensures you get funds in a quicker manner. We would like to go in a phased manner towards T+1,” he said.
The regulator has received FPI representation on T+1 and therefore has allowed a phased transition, he added.
“T+1 settlement cycle is in the interest of all market participants. A healthy arbitrage opportunity will exist if two exchanges have different settlement cycle. We see no problem in the arbitrage, or it affecting liquidity,” Tyagi said.