Sebi mulls margin waiver for same-day trades to boost cash market

India’s Securities and Exchange Board of India (Sebi) is weighing a proposal to waive upfront margins on buy trades executed using proceeds from same-day stock sales. The plan was discussed by Sebi’s risk management review committee last week, though four people familiar with the matter stressed that the talks remain preliminary and no final decision has been reached.

Under the current early pay-in (EPI) framework, selling shares clears the trade on the same day, eliminating settlement risk and releasing the sell-side margin. However, if an investor immediately reinvests those proceeds into another stock, brokers must still block roughly 20% of the purchase price as upfront margin using their own clearing limits.

Removing this requirement would free up significant capital for brokerages at clearing corporations like NSE Clearing Ltd and Indian Clearing Corporation Ltd. It would also allow smaller brokers to offer same-day settlement, a facility currently restricted mostly to larger firms due to capital constraints.

"The industry has been demanding this change for a very long time. It is a disservice to the investor if they are unable to use their money to make trades," said one person aware of the discussions.

The potential regulatory shift is a direct effort to strengthen the cash equities segment, which has lost momentum amid a broader regulatory crackdown on retail derivatives. Since November 2024, Sebi has tightened index options rules, restricting exchanges to a single weekly contract per expiry and tripling contract sizes.

Those measures have taken a toll on overall market activity. Average daily cash market turnover on the National Stock Exchange fell 7% year-on-year to ₹1.05 trillion in FY26. Average daily index options turnover dropped by a similar margin to ₹50,467 crore over the same period.

Analysts expect the margin waiver to help reverse the cash market slowdown. "Cash market turnover could get a boost if Sebi accepts the recommendation," said independent market analyst Ambareesh Baliga. "Currently, smaller brokers might not have the limits to meet margin needs for a stock that an investor, who uses EPI, wishes to buy on the T-day instead of waiting for a T+1 settlement."

"Same-day settlement, if implemented seamlessly, is a fantastic move as it will increase liquidity in the market and make churning portfolios that much easier," added Anand K. Rathi, co-founder of wealth management platform MIRA Money.

The proposal builds on an October 2024 revision to the EPI framework, which increased same-day access to sale proceeds from 80% to 100% and allowed immediate deployment of intraday profits. Sebi is concurrently reviewing the stock lending and borrowing mechanism and margin trading facility to further bolster cash market participation.