New Delhi, Sep 3: Stock brokers' association Association of National Exchanges Members of India (Anmi) on Thursday urged markets regulator Sebi to waive the penalty for short margining in all the segments till September 15 as systems are not fully geared for the new mechanism on 'pledge and repledge'.
The new mechanism on 'pledge and repledge' came into force from September 1.
Under the new framework, stock brokers will have to collect margins from investors upfront for any purchase or sale of shares and failure to do so will attract penalty.
In its letter to Sebi, Anmi requested the regulator to postpone the penalty provisions on the cash and derivative segment till September 15 as systems are not geared and tested fully, in spite of the assertions of market infrastructure institutions.
According to the brokers' association, the ground reality is different and members and investors are being put to great difficulty due to the inadequate systems, which have been developed to implement these measures. This will result in short margin because of system related issues.
It further requested Sebi to waive any penalty in the cash and derivative segments to the extent the shares are not pledged (due to multiple reasons) but lying in the demat account of the client as per previous systems prevailing till August 31.
Anmi, a grouping of around 900 stock brokers from across the country, said its members are proactively and sincerely implementing the new margin system. However, there are inordinate delays happening at each level of the process with clearing corporations and depositories.
It said forced implementation of new margin system has derailed the entire settlement cycle of stock exchanges and clearing corporations.
"Investors are badly affected too, as regular pay-in and pay-out of funds and shares isn't happening since last two days resulting in members involuntarily contravening the provisions of applicable regulatory directions," it added.
There are multiple technical glitches with regards to release of securities, one time passwords (OTPs), pledge and repledge
issues, delay in pay-in and pay-out process, thereby resulting into disruptions in margin collections, the brokers' association pointed out.
It further said brokers are facing financial pains and deep financial losses due to such technical issues.
Additionally, Anmi requested Sebi for allowing collateral account to be operative after August 31, till September 30.
Also, it requested Sebi to allow a parallel system of considering collaterals which are pledged as well as lying in the demat account of the client where broker has a power of attorney (POA) for margin reporting in the cash and derivative segment for the month of September.
Under the 'pledge and repledge' framework, trading members (TMs)or clearing members (CMs)will require to align their systems and accept client collateral and margin-funded stocks by way of creation of pledge and repledge in the depository system.
Depositories should provide "margin pledge" for pledging clients' securities as margin to the TM or CM. The latter should open a separate demat account for accepting such margin pledge, which should be tagged as "client securities margin pledge account".
To provide collateral in the form of securities as margin, a client will be required to pledge securities with TM, and TM will repledge the same with CM, and CM in turn will repledge the same to clearing corporation.
The complete trail of such repledge will be reflected in the demat account of the pledgor.
The new mechanism on 'pledge and repledge' came into force from September 1.
Under the new framework, stock brokers will have to collect margins from investors upfront for any purchase or sale of shares and failure to do so will attract penalty.
In its letter to Sebi, Anmi requested the regulator to postpone the penalty provisions on the cash and derivative segment till September 15 as systems are not geared and tested fully, in spite of the assertions of market infrastructure institutions.
According to the brokers' association, the ground reality is different and members and investors are being put to great difficulty due to the inadequate systems, which have been developed to implement these measures. This will result in short margin because of system related issues.
It further requested Sebi to waive any penalty in the cash and derivative segments to the extent the shares are not pledged (due to multiple reasons) but lying in the demat account of the client as per previous systems prevailing till August 31.
Anmi, a grouping of around 900 stock brokers from across the country, said its members are proactively and sincerely implementing the new margin system. However, there are inordinate delays happening at each level of the process with clearing corporations and depositories.
It said forced implementation of new margin system has derailed the entire settlement cycle of stock exchanges and clearing corporations.
"Investors are badly affected too, as regular pay-in and pay-out of funds and shares isn't happening since last two days resulting in members involuntarily contravening the provisions of applicable regulatory directions," it added.
There are multiple technical glitches with regards to release of securities, one time passwords (OTPs), pledge and repledge
issues, delay in pay-in and pay-out process, thereby resulting into disruptions in margin collections, the brokers' association pointed out.
It further said brokers are facing financial pains and deep financial losses due to such technical issues.
Additionally, Anmi requested Sebi for allowing collateral account to be operative after August 31, till September 30.
Also, it requested Sebi to allow a parallel system of considering collaterals which are pledged as well as lying in the demat account of the client where broker has a power of attorney (POA) for margin reporting in the cash and derivative segment for the month of September.
Under the 'pledge and repledge' framework, trading members (TMs)or clearing members (CMs)will require to align their systems and accept client collateral and margin-funded stocks by way of creation of pledge and repledge in the depository system.
Depositories should provide "margin pledge" for pledging clients' securities as margin to the TM or CM. The latter should open a separate demat account for accepting such margin pledge, which should be tagged as "client securities margin pledge account".
To provide collateral in the form of securities as margin, a client will be required to pledge securities with TM, and TM will repledge the same with CM, and CM in turn will repledge the same to clearing corporation.
The complete trail of such repledge will be reflected in the demat account of the pledgor.