Take on ASBA based Regulatory Change and hit on Float Income
Even after the Implementation of RRM(Risk Reduction Mode) at Client Level from Broker Level there still exists a lot of Risk Management that is handled at the broker level including:
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Broker blocking his own funds for cases where Client funds are short(pledge + 50% cash requirement), funding margin requirements in case of shortage when updated - Client can update MTM losses on next day.
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Broker providing Client with upfront liquidity of 80% in case of Sell Transactions even though they are paid on T+1 basis and providing VAR+ELM in to the exchange in the said case on real time from own funds and much more
If the Mandate is in the name of Clearing Corporation then what Incentive does the broker have to fund the additional capital plus do the grunt work of additional Risk Management? Earlier the broker was incentivised by the additional float income from the entire pool of Client Money. It was never free money for the broker.
The only way out for Brokers is to increase Brokerage plus cutback on some additional features like Immediate funds in case of Selling Holdings. All this will lead to Lower Turnover at exchanges thus directly affecting the Government’s income as well.
For the last two years the STT Collection has surpassed Government’s own estimates and was revised upwards of 25% for FY23 - Budget 2023: STT collection estimate for FY24 raised 10% to Rs 27,625 crore
Not to mention the 18% GST on Transaction Charges + Brokerage and SEBI Charges and the stamp duty loss.
All this also creates additional Infra Setup Requirement at the both the Bank, Broker and CC level.
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