Zerodha had earlier doubled its brokerage rates for all derivatives traders failing to maintain at least 50% of collateral in cash or its equivalents on an intraday basis, to ₹40 per order from April 1. The move sparked backlash among traders, who feared an industry-wide increase in brokerage fees as the securities transaction tax (STT) on derivatives was set to increase from April 1.
“The only change is an additional ₹20 per order for customers who trade on collateral margin (by pledging stocks) without maintaining at least 50% of the required margin in cash or cash equivalents, and only if the cash shortfall exceeds ₹5 lakhs,” said the brokerage. “Fewer than 10,000 of our tens of lakhs of active F&O traders are affected, and even they can avoid it by keeping enough cash in their account.”
Under Sebi regulations, at least 50% of margin collateral, whether for intraday or overnight positions, must be maintained in cash or cash equivalents, while the remaining portion can be held in non-cash assets. Cash equivalents include cash, bank guarantees, fixed deposit receipts, and approved securities, among others, as per NSE Clearing.
To initiate an F&O trade, clients must bring in margin, which can be either cash or pledged securities like stocks. When stocks are pledged, the usable margin is usually after a haircut. As rules do not permit trades done on pledged stocks alone, brokers have so far stepped in and put up its own money to cover the shortfall with the clearing corporation. So far, some brokers, including Zerodha, have not charged clients for intra-day shortfalls.
As more traders began using collateral instead of cash, brokers had to block more capital, increasing their funding burden.
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