Zerodha CEO Nithin Kamal says that Sebi rules are meant to protect Indians from the cold US markets


Share post:

NEW DELHI: Crediting SebiRegulatory measures to limit the impact of leveraged position on the Indian stock markets ZerodhaCEO Nithin KamathToday said that if the US market got a cold, Dalal Street would get a fever.

“But since 2010, volatility-wise, we’ve been much better compared to the US. While the credit is usually given to more local participation, it has got more to do with SEBI regulations that reduced leverage,” Kamath said.

Kamath, in a Twitter thread, stated that although the Sebi regulations had reduced the revenues of brokers for the short-term, they have led to lower volatility. “This has significantly improved the odds of retail participants doing well. One of those Nazdiki fayda dekhne se pehle, door ka nuksaan sochna chahiye things.”

He claimed that Sebi had imposed a penalty in August 2011 for not collecting end-of-day margins.SPAN) in F&O. Before then, brokers were able to allow customers trade with any margins, even overnight.

“Aug 2014: Min 50% haircut for loan against security. Until then, promoters & HNIs could borrow as much as 100%. A snowball effect resulted from the unwinding LAS positions in 2008, when markets crashed. 50% is considered a high margin for safety. NBFCs, enough to avoid liquidation on bad days,” he said.

In May 2018, penalty was imposed for non-collection of exposure & other margins in addition to SPAN for end-of-day F&O positions and in Nov 2019, Sebi started a penalty for non-collection of end-of-day VAR+ELM margins for stocks. He said that brokers could fund margins for stocks until then.

“July 2020: Peak margin penalty for allowing customers any additional intraday leverage above SPAN+Exposure or VAR+ELM,” said Kamath, who runs India’s largest discount broking platform.


Please enter your comment!
Please enter your name here


Related articles

The Benefits of a Creative Subscription with Envato Elements

If you’re looking to find and use royalty-free images and other creative resources, it can be tough to...

Get an Additional ₹100 Cashback When You Pay with Domino’s Digital Wallet Partners

How does ₹100 cashback sound? Find out more about the additional cashback you can get when you pay...

Get Unlimited Access to DataCamp’s Library of Online Courses

DataCamp subscriptions enable access to over 300 courses, as well as projects, assessments, and additional content. Whether you're...

Why You Should Buy from DaMENSCH: The Best in Quality, Service, and Value

Buying products online can be dangerous; you never know if you’re getting an authentic product, or one that’s...