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Sebi hikes margin requirement for derivatives

Wed Oct 15, 2008 19:55 IST

MUMBAI: Market regulator Sebi on Wednesday increased the margin requirement for
exchange traded equity derivatives, a step to protect the interest of investors, amid
huge volatility being witnessed on bourses in the past few days.

"With a view to ensure market safety and safeguard the interest of investors, it has now
been decided that the exposure margin shall be higher of 10 per cent or 1.5 times the
standard deviation," Sebi said in a circular here.

Analysts said the regulator's move to ensure safety of investors is in the right direction
as the markets have been showing huge volatility in the recent past.

"This will restrict speculative tendencies of the market and will create a regulatory
activity on traders and speculators to open big positions," Jagannadham Thunuguntla,
equity head of Nexgen Capital said.

At present, he said, the limit for the margin requirement in derivative products is 5 per
cent, which is calculated on the basis of share price movement, open interest and
volatility involved in options of a particular stock.

Sebi has increased this limit to 10 per cent to provide more safety to the investors as
they loose money due to the large volatility in markets, he added.

Markets, in the past few days, have been been witnessing a downward trend. The
Bombay Stock Exchange benchmark index Sensex on Wednesday closed down 674
points at 10,809 points.