NSE delays penalty for non collection of margins; new rules continue to be marred by glitches

The move comes after the ANMI, wrote to the market regulator, Ministry of Finance, and to clearing corporations, asking for a waiver of penalty for short margining in all the segments.

The National Stock Exchange (NSE) on Thursday announced that it will not levy penalty for client margin short/ non-collection and reporting in Cash and Derivatives segments till September 15. The move comes after traders, brokerages informed the market regulator and the stock exchanges that the implementation of the new margin rules has not been smooth due the lack of preparedness on the back-end. The new rules, that came into effect on September 1, require brokerages to collect 20% from traders for every buy and sell order, failing to do so invites penalties. 

“Consequent to the implementation of new framework of acceptance of securities as margin by way of pledge / re-pledge mechanism through the depository system, based on the feedback received from the members effective September 1, 2020, there has been a system congestion due to large number of client securities being pledged in TMs/ CMs/ CCs systems,” NSE said in a circular.  NSE has acknowledged that the congestion has restricted the ability of its members to comply with the requirements of collection of margins. Stock brokers have been complaining about the issues being faced due to the implementation of the new rules. 

The move comes after the Association of National Exchanges Members of India (ANMI), wrote to the market regulator, Ministry of Finance, and to clearing corporations, asking for a waiver of penalty for short margining in all the segments. “Forced implementation of the new margin system has derailed the entire settlement cycle of stock exchanges and clearing corporations,” ANMI spokesperson said. The association has alleged that investors are badly affected by the new rules.  Brokers allege that the regular pay-in and pay-out of funds and shares isn’t happening since the implementation of the new rules. 

Nithin Kamath, Co-founder of Zerodha, recently took to twitter to elaborate the situation claiming that the issues being faced by clients are to do with clearing corporations and depositories. On September 2 and September 3, the number of trades made on the BSE stood at 1,713,870 and 1,788,264, respectively. Brokerages say that the technical issues faced by their clients include, margin benefits not being reflected after successful pledges, Delay in release of collateral, unable to un-pledges shares that are re-pledged, and delay in OTP generation.