The Securities and Exchange Board of India vide its notification dated 15th September 2020 has issued a clarification on the levy of penalty for non-collection of margins from clients in the cash segment by trading and clearing members.
It is clarified that the term margin shall mean VaR margin, extreme loss margin (ELM), mark to market margin (MTM), delivery margin, special/additional margin, or any other margin as prescribed by the Exchange to be collected by TM/CM from their clients.
The TMs/CMs will have time till ‘T+2’ working days to collect margins (except VaR margins and ELM) from their clients and if the trading members collects minimum 20% upfront margin in lieu of VaR and ELM from the client, then penalty for short-collection/non-collection of margin shall not be applicable.
Further, it is clarified that, if the pay-in (both funds and securities) is made by T+2 working days, the other margins would deemed to have been collected and penalty for short / non-collection of other margins shall not arise and if early pay-in of securities has been made to the clearing corporation, then all margins would be deemed to have been collected and penalty for short/ non-collection of margin, including other margins, would not arise.
In case if a client fails to make pay-in by T+2 working days and the trading member or clearing member concerned does not collect other margins from the client within the given time period, the same would result in levy of penalty.