Intraday Margin Likely to Increase Sharply Even for Cover & Bracket Orders

In the recent circular, issued by NSE and BSE it is clarified that brokers have to collect additional intraday margins for equities & derivatives (Equity, Commodities, Currencies). This new regulation seems to be applicable even for exotic leveraged tools like cover orders & bracket orders.

Currently, brokers charge only VAR margins for Intraday Equity trades which will soon likely be VAR + ELM margin. And for FNO trades it is likely to be Initial Margin (Span + Exposure Margin) for intraday trades has to be collected upfront from the trader.

These newer regulations directly affect the traders & brokers community. It is negative news for the traders who looking for higher leverage to boost up their returns.

This Increase in margin will push more traders towards Option Buying or Short term Investing Strategies as higher margins reduce the liquidity supply from the retail segment.

Intraday based portfolio level algo traders/Systematic Traders are also the impacted ones.

Expiry Day Option Sellers are the most impacted ones as it simply destroys the higher returns the intraday option sellers make on those expiry day trades.

Overall, Controlled greed is good as it protects many entry-level traders from taking bigger leverage and thereby brings reasonable expectations in the markets.

Source: https://www.marketcalls.in/market-regulations/intraday-margin-likely-to-increase-sharply-even-for-cover-bracket-orders.html

Thread on proposed SEBI rules on FnO trading

4. Even a trader with 1 Crore in account can only sell, 100 lots in Bank Nifty. 100 * 20 * 10 rs option can give only 20k which is 0.2% return.

5. Penny Option Sellers may be out of the industry.

6. Workshops based on Weekly Options / Expiry trading may be no more.

2/

— Sunder (@SunderjiJB) January 4, 2020

Sebi scans matrimonial website to nail fraudster in front-running case

Sebi found out that the PAN provided by Avi was registered in Vaibhav Dhadda's name. His passport details named Alka Dhadda as his mother. Further, his profile on the matrimonial site showed Alka as his mother. Also, she used the email id avidhadda92@gmail.com.

The market watchdog said Vaibav was operating from Hong Kong and had access to the trading accounts of his mother and his sister Arushi.

The market regulator pointed out that there was aprima facie case of a trading pattern that had emerged in the accounts held by Arushi and Alka. It claims that the Dhaddas' modus operandi was to start picking up a stock just ahead of a buy placed by a Fidelity group entity on the same scrip. Likewise, the family would start sellling a particular stock just ahead of a sell order placed by the Fidelity company on the same scrip.

Read more at https://www.business-standard.com/article/markets/sebi-scans-matrimonial-website-to-nail-fraudster-in-front-running-case-119120501537_1.html

SEBI sets up panel to review margins on derivatives

“In India, initial margin in equity F&O segment consists of SPAN margin, exposure margin and other additional margins... Across global exchanges considered under review, only SPAN margin is collected as the initial margin. Intermittent periods of higher volatility are covered by applying event-based margins,” stated the report while adding that between January 2014 and March 2019, total initial margin applied was about 20% and 14.65% on options and futures contracts respectively.

Read more at https://www.thehindu.com/business/Industry/sebi-sets-up-panel-to-review-margins-on-derivatives/article28089359.ece

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

Brokers oppose SEBI's derivatives trading hours extension; all eyes on Friday meet now

..The brokers are unhappy with the move and seek trading in indices trade till midnight instead. “We have given a detailed presentation on derivatives to the Sebi. It primarily focuses on not extending the trading timing of single future till midnight. SEBI has agreed to meet our representation on Friday,” Rajesh Baheti, President, Association of National Exchanges Members of India told Moneycontrol.

“Nowhere in the world single-stock derivatives trade without cash market availability. Actually, we are required to trade on the basis of world market volatility which requires indices to remain open for longer trading hours,” Baheti said.

Read more at https://www.moneycontrol.com/news/business/markets/brokers-oppose-sebis-derivatives-trading-hours-extension-2573607.html

SEBI allows exchanges to extend trading hours in derivative between 9 am to 11:55 pm

India’s market regulator has allowed stock exchanges to extend trading in equity derivatives by more than eight-and-a-half hours to bring the timings in line with commodity markets.

Stock exchanges have been permitted to set their trading hours in the equity derivatives segment between 9:00 a.m. and 11:55 p.m from Oct. 1, according to a Securities and Exchange Board of India circular on its website. As of now, trading is allowed from 9.15 a.m. till 3.30 p.m.

The decision is aimed at integration of various trading segments of securities market as stock exchanges have been permitted to trade commodity derivatives along with other segments of securities from Oct. 1.

SEBI had earlier allowed unified exchanges for stocks, commodities and derivatives. That came after the Forwards Market Commission, the erstwhile regulator for commodity markets, was merged with it in the aftermath of the Rs 5,600 crore payments crisis at the National Spot Exchange Ltd.

Welcoming the decision, BSE’s Ashishkumar Chauhan said in the statement, “The introduction of the extended hours is a positive development and will bring Indian market in line with International market and Indian commodity derivative markets,”

Read more at https://www.bloombergquint.com/markets/2018/05/04/sebi-allows-exchanges-to-extend-timing-for-equity-derivatives

Merchant bankers, investment advisers, research analysts to get permanent registration

To facilitate the ease of doing business, Sebi today decided to provide permanent registration to merchant bankers, investment advisers, research analysts and eight other categories of market intermediaries.

The Securities and Exchange Board of India (Sebi) already gives permanent registration to stock brokers and sub-brokers subject to their compliance with certain requirements.

The proposal to grant permanent registration to 11 more categories of market intermediaries was cleared by Sebi’s board during its meeting here today.

Stock brokerages told to give contrary views

Market regulator Securities and Exchange Board of India (Sebi) has recently clarified that brokerage houses that have both fundamental as well as technical analysts teams coming out with reports with contrary views on a particular stock, then they should state it upfront to their clients. Sebi wants the stock brokerages to publish the contrary views since fundamental analysts track stock movements on the basis of a longer term horizon while the shorter term outlook of technical analysts may be different for the same stock and its target price may also vary.

Sebi issued the clarification after a brokerage firm sought its directive on the matter under Sebi Informal guidance scheme 2013. According to Rule 18 (9) of Sebi (research analyst) regulations, brokerage houses shall not issue or use a research report that is not consistent with the views of individuals employed as research analyst regarding a particular company.

But now, Sebi has clarified that if individual employees in different teams of the research entity hold contrary views, then the research analyst should publish the report identifying the views of the different teams, without altering the same. “Now when brokerages are giving target prices for a stock and if they vary with fundamental and technical analysts then they will have to state in their reports to avoid confusion,” says Vinod Nair, head of fundamental research at GeojitBNP Paribas Financial Services.

Source: http://www.mydigitalfc.com/news/stock-brokerages-told-give-contrary-views-809

Timeline for analysts to trade in recommended stock issued

Equities and commodities market regulator SEBI has reiterated that research analysts — be it fundamental or technical — cannot deal/trade in securities that they recommend/ follow in their research reports, 30 days before and five days after publishing a report.

Stress on uniformity

SEBI clarified in an informal guidance to Geojit BNP Paribas Financial Services that research entities shall not issue a research report that is not consistent with the views of individuals employed as analysts in a company.

SEBI added that in case contrarian views were held by research analysts employed in different teams of the research entity, the entity has to publish the report identifying the views of the different teams without altering them.

The genesis of the issue lies in the fact that fundamental analysis is used to decide whether to buy a particular stock and technical analysis to decide when to buy and when to sell. Given the different nature of both the analyses, situations occur when a fundamental analyst gives a buy call on a stock while a technical analyst gives a sell call on the same stock.

It also happens that while the retail research team of a brokerage house has a buy call on a scrip, the institutional research team may recommend otherwise.

Registered research analysts rises to 121 as of July: SEBI

After markets watchdog SEBI made it mandatory for market research analysts to get registered with it from December 2014, the number of such persons/ entities rose to 121 till date, according to official data.

Till December 1, 2014, market research analysts were operating as unregistered and unregulated entities and there were instances of them misguiding investors.

While the number stood at just two in January this year, it rose to 121 as of end July.

According to the SEBI data, there are 121 authorised research analysts providing reports and services related to the securities market.

Morgan Stanley India Company, Edelweiss Securities, Barclays Securities, Angel Broking, Religare Capital Markets are some of the entities authorised to provide services as research analysts.

CASTEXTECH lower circuit everyday from 14-JUL

LUMAXIND up 20%

You have to struggle to see the bar.

TIP: it is in the circle with O=H=L=C

SEBI disclosure applicable

SEBI review of minimum contract size in equity derivatives segment

1.At present, the minimum contract size in equity derivatives segment is Rs. 2 lakhs. The requirement was recently reviewed and it has been decided to increase the minimum contract size in equity derivatives segment to Rs. 5 lakhs.

2. Accordingly, the framework for determination of lot size for derivatives contracts specified vide SEBI circular dated January 08, 2010 is modified as under:

(i) The lot size for derivatives contracts in equity derivatives segment shall be fixed in such a manner that the contract value of the derivative on the day of review is within Rs. 5 lakhs and Rs. 10 lakhs.
(ii) For stock derivatives, the lot size (in units of underlying) shall be fixed as a multiple of 25, provided the lot size is not less than 50. However, if the contract value of the stock derivatives at the minimum lot size of 50 is greater than Rs. 10 lakhs, then lot size shall be fixed as a multiple of 5, provided the lot size is not less than 10.
(iii) For index derivatives, the lot size (in units of underlying) shall be fixed as a multiple of 5, provided the lot size is not less than 10.

Source: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1436782665000.pdf

Related article: http://articles.economictimes.indiatimes.com/2015-05-18/news/62323254_1_contract-size-derivatives-trading-futures

Grant of registration as Research Analyst

I am happy to inform that SEBI has granted me registration as Research Analyst.

As of  date, 72 entities have got registration of which 45-50 are body corporates (banks, brokerages, financial institutions, etc) and the remaining 20-25 are individuals. I am one of these individuals so the feeling is a bit heady and humbling at the same time.

I thank everyone for their support and encouragement over the last 8-10 years.

Special thanks to all the forum members, students and teachers, blog readers, invisible users of kplswing indicator, all the site visitors for their suggestions, feedback and new ideas.

Thanks once again.

SEBI link: http://www.sebi.gov.in/sebiweb/home/detail/31149/no/List-of-Registered-Research-Analysts