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Many broking houses have increased the margin requirements for their clients, to avoid any payment and settlement crisis. The margin requirement is different for different brokerages and also differs on client profile. Typically, brokers allow clients to take an exposure of five times the margin paid. As many as five leading domestic brokerages have confirmed having asked clients for a greater margin as the market is expected to remain volatile on and till the election results day (coming Friday).
“We will be asking clients to provide more margins so that we are adequately placed to brace the volatility in the coming week. We are already seeing substantial increase in volumes and have according matched up our resources,” said C J George, managing director, Geojit BNP Paribas.
Sharekhan and Angel Broking also confirmed asking their clients to provide more margins as a risk mitigation exercise. “Regulators and exchanges are gearing up their systems to be ready for volatility. We all have learnt from the last elections and we are advising our clients to be conservative and avoid taking risky positions,” said Shantanu Shyam, executive director, Angel Broking. Kotak Securities says it is considering a decision in this regard.
“We will take a call on whether the margin requirement needs to be increased or not, depending on any substantial change in client positions,” said B Gopkumar, head of retail broking at Kotak Securities. Brokerages said the decision to increase the margin was not due to any direction from the stock exchanges or the capital market regulator. Exchange officials said they hadn’t asked brokerages for increased margins.
Sebi has asked stock exchanges to strengthen their trading and surveillance systems to avoid any untoward event on the election result day. The exchanges have also conducted ‘stress tests’ to ensure they are able to handle possible shocks from a sudden increase in volumes.
A team of senior officials from the finance ministry visited market players this week to take stock of the preparedness. Another high-profile meeting of various financial regulatory bodies is slated for Monday.
