Segregation of client collateral

04 May 2022

Starting May 2nd, brokers have to segregate collateral at client level. So funds of one client can’t be used to fund another. This is an important regulatory change that makes our markets even safer. India is one of the few in the world to have this.

Post this regulation, broker’s capital will get blocked if they allow clients to sell stocks without any funds in the account, use credit from sales to trade more, use 100% of funds, & more. Essentially increasing the working capital requirement of the brokerage firm.

Nothing changes at Zerodha, but it might post-July 31st at brokerage firms who aren’t well-capitalized compared to the size of their business. We are currently in a 3 month transition period to the new regulations where there are no penalties.

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