SEBI directs bourses to impose special margins

Not satisfied with the measures taken by the stock exchanges so far to contain price volatility, the Securities and Exchange Board of India has told exchanges to hike special margins, volatility margins, ad-hoc margins, carry forward and daily margins and reduce capital adequacy linked exposure limits. Higher special and ad-hoc margins have been advocated in respect of those scrips which relatively low floating stock, Sebi said in a statement. Reduction in capital adequacy linked gross exposure limit has been suggested, "by not less than 10% of the existing limit. This reduction is not applicable to brokers having exposures upto Rs 30000000. Further, daily margins and carry forward margins are to be hiked by the various exchanges by an additional 5%. There is also an across-the-board increase in volatility margins – where the volatility is 40% and above but less than 50% the margin is being increased by one%age point to six%; 50% and above but less than 70% – up to 12% from 10%; 70%and above but less than 90% – from 15% to 20%; 90% and above but less than 110% – from 20% to 25% and where the volatility is 110% and above the margins have been increased to 30% from 20%. Sebi’s decision has been prompted by the precipitous climb in the market during the past few days and the crazy prices which some of the stocks, especially in the infotech, have been witnessing. The action is, however, not without warning – the markets regulator has been crying itself hoarse over volatile scrips and in the last two months, has not missed an opportunity to warn stock exchanges to take due precautions. In spite of hefty margins – "we collect around Rs 45000000000 in margins," Sebi chief D R Mehta said.