Response From Players Mixed

Sebi's announcement that it was considering imposing margins on institutional trades has evoked mixed reactions from the broking community.

"This is keeping in line with international standards," said Ramesh S Damani, Bombay Stock Exchange broker.

However, there were others who felt that that there was no need to bring institutions under the purview of margins as there was little chances of any payment default.

"If margins are imposed on institutional trades, it would affect volumes as institutions would then try to scale down their level of operations," said an institutional broker.

For instance, for a transaction worth Rs 5 crore, the institution would have to pay a margin of at least 25 per cent, considering a modest margin of 5 per cent.

 

In case of retail customers, where margins involved are relatively lower, brokers invariably do the funding.

"While this is not exactly legal, the broker knows that if he refuses, the customer will in turn go to some other broker who is willing to fund the margin cost," said a veteran BSE broker.