Margin Collection, Client Funding and Reporting
SEBI mandates upfront margin collection — the broker must collect full applicable margin before taking client orders. Client funds must be in a designated "Clie...
Segregation + Reporting
SEBI mandates upfront margin collection — the broker must collect full applicable margin before taking client orders. Client funds must be in a designated "Client Segregated Bank Account" separate from the broker's own. Daily margin-and-client-securities reporting to exchanges enforces this.
Post-Karvy scam (2019), SEBI tightened: (i) Upfront margin mandatory — no order without margin; (ii) Client securities must be transferred back to client demat within 1 working day of pay-out — brokers can't hold client shares in their own pool; (iii) Daily Margin Reporting to exchange; (iv) Monthly running-account settlement of client funds (or quarterly, depending on client preference); (v) Pledge of client shares for margin only via client-level EP (Excluded Pledge) — OTP authenticated by client; (vi) Client Bank Accounts designated and monitored. Violations attract heavy financial + trading penalties.
Client money held separately from broker's own
Shares move to client demat within T+1
Monthly or quarterly — money returned to client's bank
Margin file sent to exchange every day
A Practical Example
Zerodha's operations on any trading day:
• 09:14 — client A deposits ₹50,000 into designated client account
• 09:15 — order placed; upfront margin deducted from client ledger
• 15:30 — market close; MTM computed
• 18:00 — daily margin file uploaded to NSE
• On 1st of next month — Zerodha auto-transfers any unused client balance back to client's bank (monthly running-account settle)
• On pay-out day T+1 — client's bought shares auto-credited to client demat at CDSL; Zerodha has zero ability to misuse
What Makes This Important
Frequently Asked Questions
Post-Karvy (2019), SEBI mandated brokers to return unutilised client funds periodically to prevent brokers from using client money as working capital. Clients choose monthly or quarterly; default is monthly.
🧠 Quick Quiz
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