​SEBI Revises Margin Collection Timeline for Brokers

In a new major regulatory update concerning risk management for capital markets in India, the Securities and Exchange Board of India (SEBI) has made it mandatory for trading members (TMs) and clearing members (CMs) to collect all the client margins except Value at Risk (VaR) and Extreme Loss Margin (ELM) by the settlement day (T+1). The April 28, 2025 directive aligns the margin collection timelines to the T+1 settlement cycle effective January 2023.

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Background and Rationale

Historically, TMs and CMs were required to collect upfront VaR and ELM margins before executing trades, while other applicable margins could be collected within T+2 working days. However, with the transition to a T+1 settlement cycle effective January 27, 2023, the previous margin collection timeline was increasingly misaligned with the faster settlement regime.​

Responding to industry feedback, particularly from the Brokers' Industry Standards Forum (ISF), SEBI has revised this timeline. The new directive mandates that all margins, except VaR and ELM, must be collected by the settlement day (T+1). This change aims to strengthen the risk management framework and ensure timely margin collection in line with the accelerated settlement cycle.​

Key Changes to Margin Collection

According to SEBI's circular, the following modifications have been made:​

• Margin Collection Deadline Adjusted to Settlement Day: TMs and CMs must ensure that all margins (other than upfront VaR and ELM) are collected from clients by the settlement day (T+1). Clients are still required to pay VaR and ELM before placing trades.​
• Deemed Margin Collection on Timely Pay-In: If clients make a complete pay-in of funds and securities by the settlement day, other margins will be considered as "deemed to have been collected." In such cases, no penalty will be imposed for short or non-collection of margins.​
• Penalty for Delayed Collection: If the client fails to make the required pay-in by the settlement day and the TM/CM does not collect the remaining margins by that date, the shortfall will attract penalties as applicable.​

These changes are effective immediately and require stock exchanges and clearing corporations to update their bylaws and regulations accordingly.​

Industry Implications

The revised margin collection timelines are expected to have several implications for market participants:​

• Enhanced Risk Management: By aligning margin collection with the T+1 settlement cycle, SEBI aims to reduce systemic risk and ensure brokers have adequate collateral to cover potential losses.​
• Operational Adjustments for Brokers: Brokers now need to update their internal systems and processes to properly comply with the new mandated margin collection timelines prescribed by SEBI. This also involves changes to client communications, margin call procedures and fund management practices. 
• Increased Accountability for Clients: Clients must now also ensure timely payment of margins to avoid penalties. 

This heightened accountability may encourage more prudent trading behaviour and better risk assessment by investors.​

Conclusion

By amending the revised margin collection timelines, SEBI clearly shows its orientation toward proper risk management practices, keeping pace with the changing dynamics in India's capital markets. The aim is to preserve market integrity and protect investors' interests in faster settlements by collecting margins on time. 

Market participants are advised to familiarise themselves with the new requirements and make any operational changes required to conform to them.