The Securities and Exchange Board of India (SEBI) announced on April 23 that it would prolong the cross-margin benefit for offsetting positions with differing expiry dates.
SEBI specified that the alteration will take effect three months from the date of its issuance.
Cross margining, a mechanism permitting market participants to diminish total margin payments by offsetting two positions, stands as a boon. This move facilitates the transfer of excess margin from one account to another, easing financial burdens.
In accordance with the official statement, offsetting positions in correlated indices with distinct expiry dates would incur a spread margin of 40 percent. Conversely, positions with the same expiry date will retain the existing spread margin requirement of 30 percent.
Moreover, for positions with the same expiry date for both the index and its constituents, the existing requirement of a 25% spread margin will persist.
The statement also delineates that while index futures can have varying expiry dates from their constituents, all futures contracts of constituents must share the same expiry date to avail of the aforementioned cross margin benefit.
It’s noteworthy that SEBI initially introduced cross margining across cash and exchange-traded equity derivatives segments back in December 2008, aiming to enhance market efficiency and reduce margin requirements for market participants.
