Thread by @stocktalk_in

⭐️ SEBI SELLING MARGINS

Here's the logic behind SEBI's new rule to impose margins on selling shares from your holdings.

Say you sell shares from your holdings on Monday.

As per the current settlement cycle of T+2 days, the shares will be debited from your demat on Wed.

{1/5}

https://twitter.com/stocktalk_in/status/1300435218537410561

But that T+2 days cycle leaves a possibility of you transferring those shares to someone on Tuesday i.e. before the shares are debited from your demat on Wednesday.

This creates a short delivery settlement risk.

Brokers already have systems in place to avoid this.

{2/5}

But still this might happen for about 5% of the times whereas 95% of the times the settlement is done correctly.

Now, SEBI's new rules will make sure that those 5% cases are also taken care of and the risk is completely avoided.

There's a workaround for this.

{3/5}

SEBI has allowed selling of shares without any margins only if the broker creates a system wherein they can transfer the shares from your demat account to their own account on the same day of selling.

This way the shares are secured and the settlement is guaranteed.

{4/5}

Brokers are definitely facing operational challenges to implement such a system.

Zerodha has come up with Early Pay-in (EPI) facility for this.

You can read about how EPI works below 👇

{5/5}