Executive Summary:
This circular, issued by the Securities and Exchange Board of India (SEBI) on April 28, 2025, addresses the timelines for collecting margins, excluding upfront VaR margins and ELM, in the cash segment. It aligns margin collection with the T+1 settlement cycle, requiring Trading Members (TMs) and Clearing Members (CMs) to collect these margins by settlement day. The circular is effective immediately upon issuance.
Key Points / Main Content:
* **Margin Collection Timelines:**
* TMs/CMs must mandatorily collect upfront VaR margins and ELM from clients.
* TMs/CMs have until settlement day (T+1) to collect margins, excluding VaR margins and ELM, from clients.
* Clients must pay VaR margins and ELM in advance of trade and other margins as soon as margin calls are made.
* **Penalty for Non-Collection:**
* If pay-in (funds and securities) is made by settlement day, other margins are deemed collected, and no penalty applies.
* If a client fails to make pay-in by settlement day and the TM/CM does not collect other margins by settlement day, a penalty will be levied.
* **Master Circular Amendments:**
* Para 39.1.2 and Para 39.1.3 of the Master Circular for Stock Brokers dated August 09, 2024 are modified to reflect the new timelines.
* Para 39.1.5 of the Master Circular for Stock Brokers dated August 09, 2024 is modified to reflect the new penalty for non-collection.
* **Implementation:**
* Stock Exchanges and Clearing Corporations must amend bylaws, rules, and regulations to implement the circular.
* Stock Exchanges and Clearing Corporations must inform market participants and disseminate the circular on their websites.
Impact Analysis:
* **Trading Members (TMs) / Clearing Members (CMs):**
* Impact: Reduced timeframe for collecting margins (excluding VaR and ELM) from clients, aligning with the T+1 settlement cycle. Increased scrutiny and potential penalties for failure to collect margins by settlement day.
* Action Required: Modify margin collection processes to comply with the T+1 settlement cycle. Ensure timely collection of margins to avoid penalties. Update internal systems and procedures.
* **Clients:**
* Impact: Need to ensure timely payment of margins, with VaR and ELM required upfront and other margins payable promptly upon margin calls, ultimately to ensure payin is made by settlement day.
* Action Required: Adjust payment processes to meet margin calls promptly and ensure payin by settlement day.
* **Stock Exchanges and Clearing Corporations:**
* Impact: Responsible for implementing and enforcing the new margin collection timelines.
* Action Required: Amend relevant bylaws, rules, and regulations. Disseminate information to market participants. Monitor compliance.
Key Entities Referenced
Securities and Exchange Board of India: Regulatory body for securities markets in India, referred to as SEBI.
Stock Exchanges: Recognized entities facilitating the trading of securities.
Clearing Corporations: Recognized entities responsible for clearing and settlement of trades, excluding Commodity Clearing Corporations in this context.
Master Circular for Stock Brokers dated August 09, 2024: A circular outlining regulations for stock brokers.
Trading Members: Members of the stock exchange who are authorized to trade on behalf of themselves and their clients.
Clearing Members: Members of the clearing corporation responsible for clearing and settling trades.
Brokers Industry Standards Forum: An industry forum representing brokers, abbreviated as ISF.
Securities and Exchange Board of India Act, 1992: The act of parliament that established SEBI and granted it legal authority.
CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/57 April 28, 2025
To
All recognised Stock Exchanges
All recognised Clearing Corporations (except Commodity Clearing Corporations)
Sir/ Madam,
Sub: Timelines for collection of Margins other than Upfront Margins – Alignment
to settlement cycle
1. The Master Circular for Stock Brokers dated August 09, 2024 (“Master Circular”),
requires the Trading Members (TMs)/ Clearing Members (CMs) to collect margins
from their clients in cash segment (Para 39.1)
2. TMs / CMs are required to mandatorily collect upfront VaR margins and ELM from
their clients. TMs/CMs have time till ‘T+2’ working days to collect margins (except VaR
margins and ELM) from their clients (Para 39.1.2).
3. With effect from January 27, 2023, settlement cycle has been reduced from T+2 to
T+1 across all scrips in cash market. In this regard, based on representation received
from the Brokers’ Industry Standards Forum (ISF) and to ensure a more robust risk
management framework, it has been decided that keeping in view the change in the
settlement cycles, the TMs/ CMs shall be required to collect margins (except VaR
margins and ELM) from their clients by the settlement day.
4. Accordingly, the below given paras of the Master Circular shall be modified as follows:
Para 39.1.2: “Henceforth, like in derivatives segment, the TMs/CMs in cash
segment are also required to mandatorily collect upfront VaR margins and ELM
from their clients. The TMs/CMs will have time till settlement day to collect margins
(except VaR margins and ELM) from their clients. (The clients must ensure that
the VaR margins and ELM are paid in advance of trade and other margins are paid
as soon as margin calls are made by the Stock Exchanges/TMs/CMs. The period
till settlement has been allowed to TMs/CMs to collect margin from clients taking
Page 1 of 2into account the practical difficulties often faced by them only for the purpose of
levy of penalty and it should not be construed that clients have been allowed time
till settlement day to pay margin due from them).”
Para 39.1.3: “If pay-in (both funds and securities) is made by settlement day, the
other margins would deemed to have been collected and penalty for short / non
collection of other margins shall not arise.”
Para 39.1.5: “If client fails to make pay-in by settlement day and TM / CM do not
collect other margins from the client by settlement day, the same shall also result
in levy of penalty as applicable.”
5. The circular shall come into force from the date of its issuance.
6. The Stock Exchanges and Clearing Corporations are advised to:
6.1. Make necessary amendments to the relevant bye-laws, rules and regulations for
the implementation of the above decision, as may be necessary/applicable.
6.2. Bring the provisions of this circular to the notice of the market Participants and to
disseminate the same on their website.
7. This circular is issued in exercise of powers conferred under Section 11(1) of Chapter
IV of the Securities and Exchange Board of India Act, 1992 read with Regulation 30 of
Chapter VII of SEBI (Stock Brokers) Regulations, 1992 to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities markets.
8. This circular is available on SEBI website at www.sebi.gov.in under the category “Legal
→Circulars”.
Yours faithfully,
Aradhana Verma
General Manager
Tel. No: 022 26449633
aradhanad@sebi.gov.in
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