NSE trims the list of securities eligible as collateral by over 1,000, making F&O trading harder.

The National Stock Exchange (NSE) has changed the acceptance rules for securities used as collateral. This affects over a thousand securities pledged by clients for intraday or derivatives trading margin requirements.

Starting from 1st August 2024, NSE Clearing Limited will not allow securities with low trading activity or high impact cost, removing 1,010 securities from the 1,730 eligible ones for collateral. This will leave fewer securities available for F&O and intraday traders to pledge.

A few companies with high market capitalization, such as Adani Power, Yes Bank, Suzlon, Paytm (One 97 Communications), HUDCO, Bharat Dynamics, and Go Digit General Insurance, will be affected by this change.

In a circular issued on July 10, NSE stated that only equity securities meeting specific criteria will be accepted as collateral, based on their trading activity and impact cost. They will publish a final list of acceptable securities every month.

The total size of the margin trading facility book is currently around Rs 73,500 crore. The impact of this measure will depend on broker decisions.

To help clearing members replace unapproved securities, NSE will progressively increase the haircut as follows:
- From 1st August 2024: 40 percent or VAR (value-at-risk), whichever is higher
- From 1st September: 60 percent or VAR, whichever is higher
- From 1st October: 80 percent or VAR, whichever is higher
- From 1st November: 100 percent

For mutual fund schemes part of this list, the haircut will be changed to 5 percent for specific plans. For other mutual funds, the haircut will be based on the VaR margin.