SEBI Waives Margin on Cash Trades Backed by Early Pay-In From 22 February 2027

SEBI on 22 October 2026 told clearing corporations to stop collecting margin, in real time, on a client's later buy or sell positions in the cash segment up to the value of an accepted early pay-in (EPI) of securities the client has sold. The circular, HO/(320)2026-MRD-POD2/I/24141/2026, is addressed to all recognised stock exchanges, clearing corporations, depositories and stock brokers, and takes effect four months from issue, which works out to 22 February 2027.

The change matters to anyone who sells shares out of demat and then trades again the same day. Today the shares delivered early through the block mechanism protect the sale itself, but the money they free up does not immediately work as cover for fresh positions at the clearing corporation level. From February, it will, subject to a cap, a same-day check and a reversal rule that puts the risk on the broker if the client undoes the sale.

What the existing EPI margin rules already allow

The circular sets out the position under the earlier circulars and guidelines on margin collection and reporting. When a client sells shares and the EPI request is accepted through the block mechanism, that EPI is treated as margin collected towards the peak margin on the sale. Once the credit entry for the sale value is posted in the client's ledger, the EPI value may be considered as margin collected towards subsequent margin requirements, across all segments and up to 100% of the EPI value.

The gap lies in timing and in who carries the requirement. Until the ledger credit is posted, a client who sells with EPI and immediately takes a new position still needs separate margin for it, and the clearing corporation collects that margin from the trading member or clearing member. SEBI says the new framework follows proposals received from the Broker ISF, recommendations of its Risk Management Review Committee (RMRC), and internal deliberations.

The new rule: no margin from the TM or CM up to the accepted EPI

The operative condition has two parts. The client must have a net sell obligation in a settlement, and the clearing corporation must have successfully accepted the EPI request for the securities sold. Where both hold, the clearing corporation shall, on a real-time basis, not collect margin from the trading member or clearing member on the client's subsequent buy or sell positions, up to the amount of that accepted EPI.

Two points follow from the wording. The test is a net sell obligation in the settlement, so a client who sold and bought the same scrip in larger quantity during the settlement would not qualify. And the relief runs to the amount of accepted EPI, not to the client's entire sale proceeds.

How the clearing corporation will compute available EPI

On the trade date the clearing corporation will compute the available value of EPI as the lower of the value of EPI done and the value of securities sold. A client who blocks more shares than were actually sold, or whose EPI value differs from the traded value, gets cover only for the smaller figure.

If the client then takes a position in the cash segment on the same trade date, the clearing corporation will check whether the client has enough margin after reducing the available value of EPI. In practice the EPI cover is consumed first, and only the requirement above it has to be met from the client's other margin.

Squaring off the EPI sale moves the shortfall to the broker's own collateral

The relief lasts only as long as the sale stands. If the client squares off the sale position for which the EPI benefit was used, the value of EPI is removed. Any margin shortfall that results at client level shall be blocked from the proprietary collateral of the trading member or clearing member by the clearing corporation.

This is the part brokers will watch most closely. A client who sells with EPI, buys another stock on the strength of that cover, and then buys back the original shares leaves an uncovered position. The clearing corporation will not chase the client; it will block the broker's own collateral. SEBI therefore directs that trading members ensure their risk management lets a client square off a position for which EPI was given, or take any new position, only if the client's requisite margins are available with the trading member.

Trade-for-trade securities are excluded

The square-off mechanism in the circular will not apply to trade-for-trade (TFT) securities, because TFT transactions are settled on a gross basis. Netting of the sale against a later purchase, which the EPI cover depends on, does not happen in that segment, so clients dealing in TFT scrips should expect margins to work as they do now.

Worked illustration with sample figures

The figures below are an illustration only; actual margin rates are set by the clearing corporation for each scrip. Suppose a client sells 1,000 shares of Company A at ₹1,200 a share in the cash segment, and completes EPI for all 1,000 shares, with the EPI valued at ₹12,30,000.

At step 3, the remaining EPI cover after the purchase of B is ₹12,00,000 minus ₹1,60,000, or ₹10,40,000, available against any further positions that day. At step 4 the whole cover disappears, which is why a broker's risk system must refuse the buy-back of A unless the client has ₹1,60,000 of other margin with the broker, or stop the purchase of B in the first place if it cannot track this sequence.

What clearing corporations and brokers must change before 22 February 2027

Clearing corporations must amend their bye-laws, rules and regulations as needed, make the system changes required to run the real-time check, and publish the circular's provisions on their websites. Expect exchange and clearing corporation circulars with the operational detail, including how available EPI will be shown to members during the day, well before the February start.

Brokers have more to do. Their front-office risk management system will need to treat the EPI cover as consumable during the trading day, reduce it as fresh positions are taken, and block a square-off of the EPI-backed sale unless the client's own margin is in place. Firms that offer EPI-based selling to retail clients should also revisit the client-facing explanation of what happens if a sale is reversed, since the margin consequence now falls first on the broker's collateral. The circular is issued under Section 11(1) of the SEBI Act, 1992 read with Regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, and is signed by Lamber Singh, General Manager.

Official source: View the official source document