Cross margining: NSE members get Rs 700 cr benefit

Trading members on the National Stock Exchange have pocketed about Rs 700 crore from cross margining so far and this new mechanism is likely to result in a greater amount of trading depth.

Cross margining is a procedure through which participants in the market can transfer excess margin from one account to another account, thereby reducing total margin payment and cutting down systematic risks.

The cross margining mechanism implemented by the National Stock Exchange last month has received good response in registrations and trading members have benefited around Rs 700 crore (Rs 7 billion) because of this facility so far, NSE said.

"This new mechanism would definitely help. As brokers can use their holding in the cash market as a margin for the F&O requirement. This would also help the volumes because it will help the trading members to use their limited resources for capital gains," Nexgen Capital equity head Jagannadham Thunuguntla said.

Within a month of its implementation, over 20 per cent of members in the equity segment and 30 per cent of members in the equity derivatives segment have signed up for this facility for more than 300,000 clients, NSE added.

Besides, registration for NSE's cross margin mechanism is continuously rising and members have benefitted about Rs 700 crore, the statement added.

In December 2008, the Securities and Exchange Board of India permitted cross margining of positions in equities and equity derivatives.