The Securities and Exchange Board of India (Sebi) has shot down a demand put forward by foreign institutional investors for the removal of margins on derivative trades. A Sebi sub-group which was mandated to look into their various demands of FIIs has recommended against it.
According to sources familiar with the issue, it was felt that it is early days yet and the derivatves market had to mature before a decision on this can be taken.The report is on the verge of being finalised.
Margins on derivatives trades vary from month to month and is fixed by the stock exchanges based on a 99 per cent Value at Risk (VaR) proposition.
VaR is an estimate of the level of loss on a portfolio which is expected to be equalled or exceeded with a given, small probability.
Margins generally vary between 10 to 20 per cent in derivatives transactions. Sebi regulations on derivatives make no distinction between different categories of players in the derivatives segment unlike the cash segment where FIIs are not required to pay margins.
However, some concessions have been proposed
