The association of brokers in India, the Association of National Exchanges Members of India (ANMI), has requested a relaxation of the rules governing short allocation penalties with the market regulator. ANMI has written a letter to the Securities and Exchange Board of India (SEBI), BSE, NSE and clearing houses on the matter.
In the letter, the association put a request asking for a relaxation of the penalty on issues related to the short award made between August 1 and August 15. He demanded that the brokers be reimbursed for the amount of the penalty. Apart from this, the deadline for the final allocation of files must be increased from 8 p.m. to 12 p.m. the next day.
Brokers say they shouldn’t bear the brunt of technical flaws and confusion. The association said brokers did not get final margin information within the time frame. This caused problems in calculating the margin.
The brokers further stated that technical issues in the system have also led to a discrepancy between margins and final margins on many occasions.
For example, if the margin requirement for a client was supposed to be Rs 1 lakh in the morning, it has surprisingly increased.
Under these circumstances, brokers should not be held liable.
All of this has led to confusion as to how much margin should be charged to investors. The brokers also do not agree with the arrangement of giving information on the different segments.
According to them, if there is a default situation, it will not be on segments but on a global basis.
Given this, brokers should be allowed to send a combined ledger instead of sending it on a segment basis. The clearing house could separate them, the association argued.
ANMI specifies that a survey was conducted among brokers who are members of the association. At least 204 brokers participated in the exercise and the issues they face were highlighted as a result.
The issues were reported to SEBI, stock exchanges and clearing houses.
According to ANMI, out of the 204 brokers who participated, 29 brokers said that a penalty of Rs 36.23 cr had been imposed on them.
The SEBI rules were implemented in May this year, where brokers were asked to notify the clearing house of the customer fund. The rules prescribed penalties for non-compliance from August 1.
The purpose of the new margin rules was to ensure that brokers did not misuse their clients’ funds for other clients for themselves.
Previously, the rule was that the full margin could be retained for the purchase of shares. The rule was introduced so that the clearinghouse could limit the transactions a client can make so that brokers and clients do not take undue risks.
Previously, it was the broker who decided the limit of the trade.