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SEBI announces new volatility margin

The Securities and Exchange Board of India today announced the new additional volatility margin system which would be applicable to trading in all stock exchanges with effect from July 6, after lifting the ban on short sale.

In the new system, the daily price band would be reduced from the current level of 10 per cent to 8 per cent, a SEBI statement said. However, the existing weekly price band of 25 per cent is being removed and a graded margin system has been planned for volatile securities.

A security would be considered as volatile if the price of the security varies by 16 per cent or more in a single trading cycle.

For the purpose of computing this price variation, the closing price at the end of each day will be compared with the closing price at the end of the previous settlement.

However, price variations on account of calls, bonuses, rights, mergers, amalgamations and scheme of arrangements would be excluded for determining volatile securities.

UNI