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CPAI seeks to cap peak margin at 50 pc
May 31, 2021
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Trading volumes have fallen sharply in last few months and will dip further with peak margin increased to 75% from June, says CPAI
The Commodity Participants Association of India has urged the Ministry of Finance and Sebi to cap the peak at current level of 50 per cent and stop penalising the intra-day investors who provide much needed liquidity in the market.
Peak margin is the maximum margin obligation of a market participant at any given time and applies to both equity and commodity derivatives.
In its virtual meeting with Sebi on Friday, the CPAI said the trading volumes have fallen sharply in last few months and will dip further with peak margin increased to 75 per cent from June. Nowhere in the world, clients are required to pay upfront peak margins. Logically, margins are to be collected at the end of the day and not when the trade is open.
SEBI’s peak margin rule hits commodity futures
With high transaction cost adding to woes, traders face a double whammy
Leverage is the fuel that keeps speculators going and any clampdown on leverage will result in lower speculative activity. This is the trend playing out in the commodity futures market with the stage-wise implementation of SEBI’s peak margin rules since December last year.
Data from the Multi Commodity Exchange indicate that since November 2020, the average daily turnover (ADT) in commodities futures was down 23 per cent till April 30. March 2021 saw the sharpest fall of 28 per cent month-on-month, thanks to the 50 per cent peak margin requirement that kicked in then.