With peak margining, SEBI creates a level playing field for brokers while curbing excess leverage
Killing two birds with one stone, SEBI has mandated that from 1st December 2020, brokers must follow a peak margin reporting system. With this system, the regulator will be in a position to ensure that at any point of time, brokers will not be able to offer their clients excessive leverage, which could cause unwarranted volatility in markets and also result in traders burning their fingers badly. At the same time, by capping the amount of exposure that a broker can offer its clients against margins, SEBI has ensured a level playing field amongst brokers.
This is a positive development for the markets, brokers and even traders, although it may take a little time getting used to. But all in all, it moves the Indian stock markets one step closer to being more fair and safer for all stakeholders.
Read our note on Peak Margin to know more about how the system works at Ventura Securities.