SEBI Panel Backs Cash Segment Margin Cut to Boost Trading Volumes

• A SEBI panel has approved a proposal to rationalize cash segment margins, aiming to encourage more cash transactions in the market.
• The panel recommended that margins should not fall below 12.5%, with SEBI making the final decision on the exact level.
• Current VaR and ELM for most stocks range from 12.5% to 20%, collected to cover potential losses and systemic risk.
• SEBI is reviewing the proposal, requiring further back-testing and consultation with stakeholders before a final decision.
• The move seeks to strengthen the cash market, whose trading volumes, despite doubling in three years, lag behind equity derivatives.

Why It Matters: SEBI panel endorses reducing cash segment margins to boost trading, with a minimum 12.5% floor.