SEBI has introduced a new norm where they will be collecting margins for even the cash segments similar to what we have in derivatives. This is to come into effect from January 1, 2020. In fact, even if one wants to sell shares perhaps they will have to pay an upfront margin.

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Earlier as well margins were collected for cash and futures trades but there were two components for these margins. One was the VaR and two was extreme loss management margins, which provided a buffer to the brokers ahead of trades made but now from Jan 1, 2020 for cash trades these margins would be paid on day one itself.

From April 1, non-compliance of this would be penalised which brokers would have to pass on to their clients, which in turn would drive away trading volumes.

Throwing further light on this directive, Deena Mehta, MD at Asit C Mehta Invst told CNBC-TV18, “This will definitely impact the volumes in the market because if we look at how does a normal cash segment customer trades - he places an order to buy or he may place an order to sell and he would try to set-off buy versus sell and try to use the funds from the sell to the buy. If we look at the entire transaction the flow of money or shares from the customer to the broker happens only on T+2 day and the money flows between T+3 and T+5. Now what we are going to ask the customer is that every thing that you want to do, if you want to sell give me shares in advance otherwise there will be a margin, if you want to buy give me margin money in advance. So this entire process which are followed currently they are being fast forwarded I would say in the entire system and it will take time for people to understand what we are trying to say.”

She further added, “Some kind of education on a public platform by SEBI is also necessary, so that people understand. Because the bad part of it is going to be the penalty and if the penalties are going to be similar to derivatives penalties, which are as high as 5 percent per day so these penalties are very strict so very high level of education is required."

"These changes are really impacting the entire process which is being followed and I feel that customers should be educated about this.”