NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
Under current SEBI rules on upfront margin collection in the cash segment, what must a stock broker ensure regarding client margins?
Brokers must collect margins from clients upfront, and any short or late collection is reported to the exchange and attracts penalty. This applies to the cash segment as well as derivatives, and it is not limited to large trades.
- AMargins can be collected from clients at any time within the settlement cycle after the trade
- BMargins are to be collected from clients upfront, and shortfalls attract penalty reported to the exchangeCorrect
- CMargins need to be collected only for derivatives and not for cash market
- DMargins are to be collected only from clients whose trades exceed Rs 10 lakh
Explanation
SEBI requires brokers to collect margins upfront from clients, and short or late collection of margins is reported to the exchange and attracts penalty. The requirement applies in the cash market also, not only to derivatives, and no Rs 10 lakh threshold applies.
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