The Securities and Exchange Board of India (SEBI) vide Circular no. CIR/HO/MIRSD/DOP/CIR/P/2019/139 dated November 19, 2019, has mandated the collection and reporting of margins from clients in the cash segment since January 1, 2020. Further, the penalty for short collection/non – collection of margins will be mandated from April 01, 2020. 

However, keeping in view the current pandemic, SEBI has extended the provision of levying penalty on short/non-collection of margin from time to time vide circulars. Effective from September 1, 2020, the aforesaid penalty provisions will be applicable and users will be required to ensure upfront margin availability as per the requirements for executing trades in the cash segment. 

So, when you place an order, it is mandatory for Groww to collect upfront margin amount [Value at Risk (VaR) and Extreme Loss Margin (ELM)] from you on the day of the trade. Also, the Mark to Market (MTM) Margin and any other special or additional margin as prescribed by the exchange is to be collected within two trading days.

Also Read: Understanding the Concept of Margins in Cash Market.

Here’s a quick summary for your reference. Read on further to understand the cases in detail.

Buy ordersNo changes. Entire amount will be collected upfront.
Sell orders (from Demat)No changes. Entire sell amount and profit will be available to invest immediately.
Same-day sell orders (intraday)Profit amount: Available to invest on the next trading day.

Rest of the sell amount: Available to invest immediately (after adjustments and applicable charges).

Next-day sell orders (BTST)No changes. Entire sell amount will be available to invest immediately.

How Does it Impact You?

Here are a few examples to demonstrate the impact of this regulation on your trading experience. 

Buy Order : There are no changes here. You will have to pay the entire amount upfront.

Sell Order 

When you try to sell a share there can be 3 possible scenarios. For all the cases, we will assume you bought 100 Shares of a Company A at Rs.10 per share. 

Case 1: If You Sell After the Shares are Delivered to Your Demat Account

Let’s say, you bought the shares on Monday and the shares got delivered to your Demat account on Wednesday. If you place a sell order on Thursday or later, the entire sell amount and the profit will be available to invest immediately.

Case 2: If you Sell Your Shares on the Same Day of Buying

Say you sell the same 100 shares on the same day ( T Day) at Rs.12/share. Then you book an intraday profit of Rs 200. Now, this intraday profit cannot be used as an upfront margin amount on the same trading day for taking further positions.

The profit that you made which is Rs.200 will be available to invest on the next trading day. The remaining amount or the sell amount would be

(Rs.12 x 100) – Profit = Rs.1000.

This amount after adjustments and applicable charges will be available to invest immediately and can be used for taking new positions. 

Case 3: If You Sell Your Shares on the Next Day of Buying

Suppose you bought 100 shares of a company A on Monday and sold them on Tuesday/Wednesday. Then, the entire sell amount will be available to invest on the same day.

Please note: BTST trades carry an inherent risk of Shortage and Auction as the securities are still not delivered to your DEMAT account and you may incur penalties. To safeguard the interest of investors we will block BTST trades on the securities which are in Trade for Trade(T2T), ASM and GSM categories. So, kindly plan your trades accordingly.

For T2T list of stocks: Please refer the link to check Current Market Records

For ASM and GSM list: Please refer the link below.

Hope this was helpful!