June 7, 2019

Derivative traders in India pay up to 500 times more margin, says study by SEBI sub-committee

India is the only country in the world where initial margin charged in the F&O (futures and options) segment consists of three margins -- SPAN (Standardised Portfolio Analysis for Risk) margin, exposure margin and other additional margins. All other countries charge only SPAN margin.

The study also found out that if India followed only the SPAN margin system it would have been good enough to cover the risk for 99.44 percent instances of At-the-Money (ATM) and Out-of-the-Money (OTM) stock option contract. Simply put, there is no need to burden traders with extra margins.

Higher margins result in a lower return on investment (RoI) for a trader. Ironically, an FII who has an option of trading both in India as well as in Singapore Stock Exchange (SGX) has to pay the complete margin in India but only the SPAN margin if he trades the Nifty derivatives in SGX.

Read more at https://www.moneycontrol.com/news/business/derivative-traders-in-india-pay-up-to-500-times-more-margin-says-study-by-sebi-sub-committee-4072141.html

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