NSE, BSE refute reports of reduced stocks for margin funding, confirm no changes made

Nov 21, 2024

Synopsis
NSE and BSE refuted claims of removing 1,010 stocks from the MTF list. The MTF eligibility list is updated monthly based on objective criteria like liquidity. The exchanges clarified that the acceptance of collateral follows a risk-based approach to ensure efficient clearing and settlement processes.

Exchanges NSE and BSE refuted recent media reports that claimed removal of 1,010 stocks from the list of collaterals eligible for Margin Trading Facility (MTF). Both NSE and BSE have clarified that no such circular was issued, and there have been no large-scale changes to the list of securities eligible for MTF.

As per the existing regulatory framework, MTF is provided by trading members (TMs) to their clients for stocks and exchange-traded funds (ETFs) included in the Group I list of securities.

This list, maintained by clearing corporations, is updated monthly based on objective criteria such as impact cost. which is a measure of liquidity. Currently, about 2,000 securities qualify under Group I.

The exchanges said the acceptance of collateral by clearing corporations follows a risk-based objective approach aimed at enhancing the efficiency of risk management and ensuring smooth clearing and settlement processes.

"Contrary to reports, there has been no reduction in the number of securities eligible for MTF. Further, acceptance of collaterals by clearing corporations is based on a risk based objective approach to manage the efficiency of risk management and clearing and settlement," a release from the exchanges said.

"The list of acceptable collaterals is updated periodically without any scrip-specific discrimination," both exchanges have further clarified.

The lending under margin trading went up in October 2024 to all-time record high level of over Rs 80,500 crore.

Under the margin trading facility, brokers lend money to traders to buy more shares and earn interest income while keeping the financed shares as collateral.

Recently, Sebi tweaked the margin funding norms by allowing securities funded through cash collateral to be considered as maintenance margin. The move will help alleviate the burden of additional collateral towards the maintenance margin for the margin trading facility.

[The Economic Times]