NEW MARGIN POLICY BY SEBI, UPDATED!!

Recently, a lot of discussions have been going around regarding the new Margin Pledge rules implemented by SEBI. The new development came into effect on 1st September 2020 after SEBI refused to extend the deadline.

In this blog, I will explain in brief this topic and how it will affect retail traders.

Read the full blog to get a complete understanding.

WHAT IS THE POLICY ??

From September 1, 2021, there will be no additional margins apart from VAR+ELM (equity) and Span + Exposure (F&O).

THE TRUTH:

Many YouTubers and many noob traders are spreading rumors that exchanges are removing intraday margin completely. It’s completely false.

Most stocks have over 20 percent VAR and ELM, so this norm means the maximum intraday leverage for stocks is 20 percent of trade value. In short, you will get 5X after st Sep 2021.

In F&O,  you have to pay full margin upfront that is Span + Exposure, which is roughly equal to 5X.

In short, from 1st Sep 2021, you will get flat 5X no matter whether you trade intraday or positional.

My Experience:

I have been actively trading in the market since 2008, and have meet innumerable traders in this long journey. Meet many successful full-time traders and many many more unsuccessful traders. 

How it will impact retail INTRADAY traders?

Let me be here more specific and explain it with reference to my own INTRADAY trading.

I use around 8-10 lac capital. I traded intraday in my Zerodha account which currently provides 10X leverage. i.e. I can buy sell scripts worth 80lakhs to 1 cr. in intraday with the help of margin.


Let’s take an example.

On 6th May 2021,

I traded intraday on:

BNF OPTION, AXIS BANK, BAJFIN, & PIDILITE  & made a profit of 1.2 lacs on it.

INSTAGRAM POST

As you can see my turnover was 44 lacs, i.e. I have used less than 5X leverage (considering that my capital is 10 lac).

After 1ST Sep 2021, I will get 5X leverage.

It will not impact my trading much.

I make money with my skills, not because of leverage. Leverage is just a catalyst.

These margin rules will not affect me and my students much as we don’t use crazy leverage.

We have a proper risk management system that we are using and it is in line with SEBI’s leverage.

If you are trading with a broker that is providing 20X, 30X leverage previously then it will impact you.

Volume impact:

In my opinion, the volume will not get impacted much. 90% of trading volume is generated by FII, DII, Pro desks, etc. 

And I have seen their work very close. No big fund uses more than 2X to 3X margin. They have plenty of funds to manage their position.

Rather than a decrease in volume, I am expecting an increase in volatility from 1st Sep 2021. This is very good news if you are an intraday trader and you are having a proper strategy and risk management system. You will be able to make a good profit if you know how to ride this volatility.


Harsh reality:

I have seen many people complaining about this Margin rule. 90% of people complaining are those who are not even profitable traders. In my 9+ years of the trading career, I have not seen a guy making consistent money by taking very high leverage. I will trade the same as I am doing now. 
I am seeing many misconceptions going around regarding this new SEBI’s rule. Hope this blog cleared your doubts.

Final words:

If you are trading currently consistently and making decent returns, it will not impact much. Maybe you have to add some 10-20% extra fund in some cases, but not more than that. 

If you are losing trader, you just got another topic to debate.

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