Court Asks SEBI, Centre To Respond To Plea Challenging Circular On Upfront Margin
The logo of Securities of Exchange Board of India (SEBI) is pictured on its headquarters in Bandra Kurla Complex in Mumbai, India. (Source: BloombergQuint)

Court Asks SEBI, Centre To Respond To Plea Challenging Circular On Upfront Margin


The Delhi High Court Wednesday sought response of the Securities and Exchange Board of India and the central government on a plea challenging a circular that mandates traders and investors to maintain minimum upfront margin in their accounts through the day.

Justice Jayant Nath issued notice to the Ministry of Finance and Securities Exchange Board of India on the petition and asked them to file their replies.

The court, which refused stay on the circular, listed the petition for further hearing on March 2, next year.

The plea filed by Wisdom Capital Advisors Pvt. Ltd., a company rendering online marketing services and involved in the securities market, claimed that it was directly affected by any change brought into the existing system.

Also read: BQ Explains | How SEBI’s New Margin Trading Rules Impact Investors

It said the July 20 circular issued by SEBI will have a direct impact on the livelihood of many retail traders and there is an apprehension that if the volumes in derivatives deplete it will have an adverse effect on the corrections as there will be a huge drop in Goods and Services Tax, Securities Transaction Tax and stamp duty revenues on derivatives trades.

The case of the petitioner is that the impugned circular affects all similarly placed entities like the petitioner in their dealings with the general public in buying and selling shares and securities on their behalf, the petitioner company, represented through senior advocate Sandeep Sethi, said.

The plea, through the firm's director Debu Prasad Mukherjee, claimed that the new rule will have a huge impact on the functioning of the stock market and it was evident that stock market was the only sector that has been able to function since the lockdown began in India on March 25 this year and the sector provided numerous opportunities to many people facing job losses to survive in these pandemic times.

The plea said the concept of margins' has been prevalent in the securities markets all over the world since time immemorial but the circular introduced a vague and cryptic concept of Peak Margin' thereby imposing an obligation for maintaining the minimum margins.

Also read: SEBI Grants One-Time Extension To Brokers To Implement New Margin Trading Norms

Any short-collection or non-collection would immediately attract penalty on the trading members or clearing members, it said and added that the circular has come into effect from Dec. 1.

The plea sought to declare the circular as unreasonable and arbitrary.

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