New MarginGuidelines

Recently, SEBI published a new circular on margins. SEBI announced stringent margin norms for traders. The new margin norms are designed to further protect market investors which have been explained below:

A brokerage is the guardian of client funds and securities. When you transfer funds or stocks to your broker, you entrust your broker with the obligation of handling these assets without any partiality. The regulatory authority has taken steps to strengthen the regulatory structure which has in turn steered them to create a new pledge &un-pledge system for stocks.

To trade with your broker, you need to maintain specific margins for your trades. Margins can be in the form of cash or stocks. Transferring cash is an uncomplicated and easy process. While stocks are concerned, till now, whenever a client desired to pledge stocks and obtain margins, the client had to transfer securities from the client’s own account to the broker’s account. These securities were then pledged to the Clearing Corporation. In this case, the stocks needed to move out of the client’s account which in turn created an unaddressed void in the procedure, allowing some brokers to misuse the pledged securities. The problem has been resolved by introducing the new pledge system which is now live as below:

In the new pledge system, stocks do not go out of the investor’s demat account, a pledge is created in favour of the broker. The broker then re-pledges these securities in favour of the Clearing Corporation and acquires the required margins. Since stocks do not go out of the investor’s account, there are no chances of misuse of securities. Further, it would not be possible to pledge one client’s stocks and offer margin to another client.

In the previous pledge system, since stocks were held in the broker’s securities collateral account, the broker was the beneficiary of all cash and non-cash corporate actions like dividends, bonus, rights, etc. The broker would then transfer the benefits to the client. This would not happen under the new pledge system. Going forward, since stocks are all held in the client’s own account, any approved security would be recognised for pledge.

The new pledge system is aligned with the three principal agendas of SEBI, which are:

  • To shield the interests of investors in securities;
  • To encourage development of the securities market; and>
  • To streamline ®ulate the securities market.


Process – Share Pledge at Compositedge

  • Login to your back office portal from the website
  • Go to Portfolio and click on Margin Pledge
  • Select PLEDGE
  • Select your Exchange NSE / BSE
  • Tick the scrip you wish to offer for pledge
  • Click on Save
  • Once the instruction is received and processed by our DP, you would receive a link on your registered email ID
  • Click on the link and then enter your PAN or Demat A/c Number on the depository page to generate an OTP
  • Authorise the request on the depository page by entering the OTP received on your registered email and mobile number
  • You would then receive a confirmation from CDSL of Successful Authorisation
  • The pledge process is now complete and limits would be provided by your Broker accordingly the following day.

Process – Share Un-Pledge at Compositedge

  • Login to your back office portal from the website
  • Go to Portfolio and click on Margin Pledge
  • Select your Exchange NSE / BSE
  • Tick the scrip you wish to UN-PLEDGE
  • Click on Save
  • The un-pledge process is now complete and shares would reflect in your account the next day