Understanding the Impact of SEBI's Peak Margin Norms on Trading with Sale Proceeds

Why can't I use the proceeds from my sold holdings for trading on the same day?

As per the peak margin norms implemented by SEBI, brokers must now collect margin upfront for all trades. This affects your ability to use the proceeds from selling your holdings for trading on the same day.

When you sell your holdings, your broker will request the clearing corporation to debit the required margin amount from your account and credit it to the broker's account through a process called Early Payin (EPI). As a result, the money from the sale of your holdings will be used to settle your sell trade, and you won't be able to use it for new trades on the same day. If you wish to place new trades, you must have enough cash in your trading account to cover the margin requirement.

However, from the next trading day (T+1) onwards, you can use the sale proceeds of your holdings for new trades. For more details, refer to this notice.

Let's take an example: Mr. Raju owns 100 shares of Axis Bank, which he sells on Monday at ₹900 each, receiving ₹90,000. On the same day, he wishes to buy 50 shares of HDFC Bank Ltd. at ₹1600 each. Unfortunately, his orders are rejected because he needs to have enough cash in his trading account to cover the margin requirement for buying HDFC Bank Ltd. shares. The money from selling Axis Bank shares will be available to him on Tuesday (T+1), and he can use it for new trades from that day onwards.

To learn more about the upfront margin regulations, you can refer to this circular.

Note: We are actively working on implementing a Real-time EPI mechanism that will allow the Payin to be done in real-time, giving traders and investors the flexibility to use the sale proceeds of their holdings for new trades instantly. 

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