The Securities and Exchange Board of India (SEBI) has extended the cross margining facility for all categories of market participants. It was earlier extended it only to the institutional trades. The move would help to satisfy the financial needs of various broking firms, as cost of working capital has risen sharply in the past few months.

Cross-margining is also called spread margining and it allows the market participants to reduce the total margin payment required for business under two mutually offsetting positions. Thus excess margin can be transferred from one account to another one.

The head of Enam Securities, Dharmesh Mehta said that the move would prove very beneficial for broking firms and lead to efficient and optimum use of money. It would reduce systematic risks by providing cash on time in the tough financial conditions. The move is a step towards a mature market under volatile market conditions.

A client must have two accounts to avail facility of cross margining as per new regulations. The regulator has also imposed a spread margin of 25% of the total applicable margin on the eligible off-setting positions. The benefits of cross margining would be computed at client level on an online real time basis. Traders would pass benefits to clients.