Dear Client,

This is to bring to your attention the major changes in margin requirements as in accordance with the SEBI Guidelines and Circulars, margins will be mandatory for all the trades in the Cash Segment.

The change:

  • As per this directive you are now required to maintain upfront margins to execute every trade in the Cash Segment too.
  • This includes both ‘Buy’ and ‘Sell’ transactions.
  • The margin can be in the form of cash / stocks pledged in favour of the Trading Member or other acceptable forms of margins.
  • Insufficient margin can lead to penalties by the Exchange/ Squaring off of your positions.

How this affects you:

In case you had given a POA in favour of Elite Wealth Advisors Limited to consider the stocks in your Demat account as margin, such securities were considered as margin for your trades. Effective from August 1, 2020, these shares cannot be considered as margin. Further, no limit will be provided on the shares lying in your Demat Account after the haircut and the credit available on the T day in your Trading account arising out by selling of shares will also not be considered as Margin.

Since we strive for you to have a seamless trading experience, the shares in your Demat Account will now have to be pledged in favour of Elite Wealth Advisors Limited to be treated as margin for your trades. In order to make the provisions of the said circular applicable as mandated by SEBI, there will be certain changes in the POA provided by you in favour of Elite Wealth Advisors Limited.

So, what’s going to be considered as margin, you ask?

Going forward, the following will be considered as margin in the customers’ accounts with Elite Wealth Advisors Limited:

  • Clear ledger balance.
  • Securities pledged as collateral for margin purposes.
  • Securities lying under collateral account with us (up to Aug 31, 2020).

Which trades get affected:

  • Along with ‘buy’ and ‘sell’ orders, BTST trades where you sell the shares before the settlement day i.e., before the delivery of shares, will also be affected. This means that if you buy stocks today and sell tomorrow, you will have to pay margins for both the trades.

Here’s an example to help you understand further:

CASE A

  • Available margin: Rs 60,000 in cash/ other acceptable margins
  • Order value: Rs 1 lakh
  • Margin requirement: 20%
  • Margin blocked during BUY order: Rs 20,000
  • ‘Sell’ margin requirement: 20%
  • Sell on T+1 day: Rs 20,000 in cash / other acceptable margins
  • Total margin required: Rs 40,000
  • Balance margin available: Rs 20,000 (Initial Rs 60,000 minus margins blocked Rs 40,000)
  • Additional margin needed: Zero

CASE B (low available margin)

  • Available margin: Rs 30,000 in cash/ other acceptable margins
  • Order value: Rs 1 lakh
  • Margin requirement: 20%
  • Margin blocked during BUY order: Rs 20,000
  • ‘Sell’ margin requirement: 20%
  • Sell on T+1 day: Rs 20,000 in cash / other acceptable margins
  • Total margin required: Rs 40,000
  • Additional margin needed: Rs 10,000 (Initial Rs 30,000 minus margins blocked Rs 40,000)

What if adequate margins are not maintained?

  • On non-adherence of adequate margins, Elite Wealth Advisors Limited is authorised to report the shortfall to the Stock Exchange and / or sell part or full stocks in your demat account.
  • Shortfall penalty in Cash Segment will be levied from 1st August 2020.

We request you to keep sufficient margin in cash/other acceptable margins to avoid levy of shortfall penalties.

You can read the full details in the SEBI circular (No.: SEBI/HO/MRD2/DCAP/CIR/P/2020/127 dated 20th July, 2020 (here) & No. SEBI/HO/MIRSD/DOP/CIR/P/2020/28 dated 25th February, 2020 (here). The exchange has also answered some frequently asked questions. You can find it here.

We value your business and hope to have an enduring association with you in the future.

Thanking you

Team Elite Wealth Advisors Limited