SEBI Revamps Settlement Cycle Framework

SEBI mandates brokers to collect all margins, besides VaR and ELM, by T+1 settlement day. This change aligns with the transition from a T+2 to T+1 cycle. Failure to comply by the settlement day incurs penalties, reinforcing a stricter risk management framework for brokers and clients.

The Securities and Exchange Board of India (SEBI) has issued a directive requiring brokers to collect all margins, except Value at Risk (VaR) and Extreme Loss Margin (ELM), by the T+1 settlement day. This move comes in response to the recent transition from a T+2 to T+1 settlement cycle.

Trading and clearing members must now ensure that these margins are collected upfront. Previously, they had until the T+2 working days to secure margins, excluding VaR and ELM, from clients. According to SEBI's latest circular, issued after consultations with the Brokers' Industry Standards Forum, this change aims to bolster the risk management framework.

The new regulation stipulates that while clients are still obligated to settle margin calls, completion of payments by the settlement day implies all necessary margins have been met, without incurring penalties. However, failure to complete payments on time will result in penalties being applied. Effective immediately, this framework underscores SEBI's commitment to maintaining robust market operations.

(With inputs from agencies.)