Sebi’s new margin system derails stock exchanges’ settlement cycle

Sebi's new margin system has impacted the settlement cycle of stock exchanges and clearing corporations and for the first time in NSE’s 25 years of operations, settlement could not be completed on due date, according to the Association of National Exchanges Members of India (Anmi), a brokers’ body.

Anmi on Thursday made a submission to the Department of Economics Affairs, Ministry of Finance, Securities and Exchange of Board of India, stock exchanges and clearing corporations requesting for waiver of penalty for short margining in all the segments till September 15, due to severe challenges in streamlining processes. “Forced implementation of a 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 the last two days, resulting in members involuntarily contravening the provisions of applicable regulatory directions. First time in the history of NSE of 25 years and more, settlement could not be completed on due date (i.e. 2nd Sep. 2020 between 1.30 to 2.30 PM) and clearing corporations released the payout only after 3.00 am in the morning of the next day i. e. 3rd Sep. 2020,” Anmi said.

NSE issued a circular saying exchange wouldn't levy penalty on short margin till September 15 as requested by broker's body ANMI.

There are multiple technical glitches with regards to release of securities, OTPs, pledge and re-pledge issues, delay in pay-in and pay-out process and thereby resulting into disruptions in margin collections and reporting though the margins were sufficiently complied before the onset of the new system, Anmi said.

Deven Choksey, managing director, K. R. Choksey Shares & Securities, said, “New margin system introduced since Sept. 1, 2020 has derailed the entire settlement cycle of stock exchanges and clearing corporations. Investors are badly affected too, as regular pay-in and payout of funds and shares isn't happening since the last two days.”

“Finger pointing is happening now, blaming forced implementation of a new system. The flaw is in the ecosystem which isn't ready! This isn't the first time that new systems are introduced without readiness! Past experiences reveal that under preparedness and kneejerk implementations has been a regular method whenever new systems are introduced. And it has always caused so much stress on the entire market,” Choksey said.