The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing a comprehensive review of the Margin Trading Facility (MTF) framework to enhance operational efficiency, strengthen risk management, and facilitate ease of doing business. The proposals include making eligible collateral uniform across cash and MTF transactions, permitting EPI sell credits as collateral under specified conditions, providing a 30-day rebalancing period when securities change category, introducing a uniform Rights and Obligations document, expanding permissible funding sources to include Non-Convertible Debentures (NCDs), revising broker exposure norms with ring-fencing of net worth, recognising passive breaches of client-level exposure under specified conditions, increasing the minimum net-worth requirement for brokers from ₹3 crore to ₹5 crore, allowing LLP brokers to offer MTF, streamlining disclosure requirements, permitting fungibility between MTF and non-MTF ledgers, enabling auto-pledge mechanisms for funded stocks, and retaining the higher maintenance margin of VaR + 5 ELM where cash collateral is used as pay-in due to wrong-way risk. Public comments have been invited until July 9, 2026.
Securities and Exchange Board of India
Consultation Paper on “Review of Margin Trading Facility (MTF) Framework”
SEBI- Jun 18, 2026 | Reports : Reports for Public Comments
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Objective
1. This consultation paper seeks comments / suggestions from the public on the proposals relating to the review of the Margin Trading Facility (MTF) Framework, as set out in the proposals at paragraph 8 below.
2. The proposals, inter-alia, seek to enhance operational efficiency and ease of doing business for stock brokers, and to strengthen the calibration of risk and margining in the MTF Segment.
Background
3. The MTF framework was first introduced in 2004. A comprehensive review of the framework was carried out in 2017 to enable greater participation. In 2022, units of Equity ETFs categorized as Group I securities were permitted as eligible securities for MTF and as eligible collateral under MTF.
4. Subsequently, SEBI vide circular dated September 11, 2024, permitted the cash collaterals of the client to be used as pay-in for the MTF position and the securities equivalent to the amount of cash collateral shall be used as margin for the MTF position. Through this structure, the overall risk of the transaction increased due to the Wrong-way Risk i.e. the funded stock itself is used as margin for the transaction. Considering the same, the above structure was allowed with a higher margin i.e. Value at Risk (VaR) + 5 times Extreme Loss Margin (ELM) instead of VaR + 3 ELM.
5. The present provisions governing MTF, including the forms of eligible collateral, initial and maintenance margins, eligibility (net-worth) criteria, sources of funds, leverage and exposure limits, disclosure requirements, the Rights and Obligations Document, and maintenance of records, are set out in Clause 4 of Chapter 1 of the Master Circular for Stock Exchanges and Clearing Corporations dated December 30, 2024 (hereinafter referred to as “Master Circular”) and the same is also placed at Annexure-1.
Need for review
6. In light of the growing volumes of trades under the MTF, a review of the framework has been considered necessary to ensure continued robustness of risk management while facilitating ease of doing business.
Consultation
7. Based on the suggestions received from the Brokers’ Industry Standards Forum (ISF) for a review of the MTF Framework and discussion with various stakeholders, the proposals were discussed in Secondary Market Advisory Committee (SMAC) of SEBI. Based on the recommendations of SMAC and subsequent internal deliberations the proposals are given at paragraph 8 below.
Proposals
8. The proposals for review of MTF Framework have been stipulated in the Table below.
9. Currently Margin Trading Facility is only available for Equity Shares and units of Equity ETFs that are classified as ‘Group I security’. SEBI is in the process of reviewing the group classification of securities for the purpose of margin, collateral, MTF and Securities Lending and Borrowing Mechanism (SLBM). Consultation paper in this regard will be issued separately.
Questions for Public Comments:
10. Comments/Suggestions from the public are invited on the following questions:
10.1. Do you agree with the proposal at paragraph 8.1 above?
10.2. Do you agree with the proposal at paragraph 8.2 above?
10.3. Do you agree with the proposal at paragraph 8.3 above?
10.4. Do you agree with the proposal at paragraph 8.4 above?
10.5. Do you agree with the proposal at paragraph 8.5 above?
10.6. Do you agree with the proposal at paragraph 8.6 above?
10.7. Do you agree with the proposal at paragraph 8.7 above?
10.8. Do you agree with the proposal at paragraph 8.8 above?
10.9. Do you agree with the proposal at paragraph 8.9 above?
10.10. Do you agree with the proposal at paragraph 8.10 above?
10.11. Do you agree with the proposal at paragraph 8.11 above?
10.12. Whether identification of trade as normal cash market or MTF be done at the time of order placement?
10.13. Any additional safeguards/changes which may be considered in the MTF Framework?
Public Comments on this Consultation Paper:
Public comments are invited on the proposal to review the Margin Trading Facility (MTF) Framework. The comments/ suggestions should be submitted latest by July 09, 2026 through the following link:
https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPubl icComments=yes
In case of any technical issue in submitting your comment through web based public comments form, you may send your comments through e-mail to mrd pod3@sebi.gov.in with the subject “Review of Margin Trading Facility (MTF) Framework” on the proposals at paragraph 8 above.
Issued on: June 18, 2026
Annexure-1
The existing provisions with regard to Margin Trading Facility may be referred at Paragraph 4 of Chapter 1 of Master Circular for Stock Exchanges and Clearing Corporations dated December 30, 2024. The same can be accessed at this link.
Annexure-2
Illustration-1
Higher maintenance margin in case when funded stock is considered towards maintenance margin to the extent of cash collateral provided by the client:
1. With regard to higher maintenance margin in case of funded stocks, margins applicable for various scenarios is illustrated in below table:
| S No | Particulars (For the MTF Book of a F&O securities) | Scenario 1 – Cash used for pay-in | Scenario 2 – Cash not used for pay- in (up streamed) | Scenario 3 – Securities as collateral (margin pledge) |
| 1. | Client Contribution | 10,000 | 10,000 | 10,000 (after haircut@VaR) |
| 2. | VaR (Say) | 9.5% | ||
| 3. | ELM | 3.5% | ||
| 4. | Initial Margin Requirement | VaR + 3 ELM = 20% | ||
| 5. | Initial Margin | 10,000 | 10,000 | 10,000 |
| 6. | Gross Exposure (T day) | 50,000 | 50,000 | 50,000 |
| 7. | Funds used for pay-in (T+1 day) | 10,000 | 0 | NA |
| 8. | Net funding (T+1 day) | 40,000 | 50,000 | 50,000 |
| 9. | Maintenance Margin in the form of Funded Securities/Cash/ Margin Pledge (T+1 day) | 10,000 | 10,000 | 10,000 |
| 1. | Value after VaR as haircut | 9,050 | 10,000 | 10,000 |
| 2. | Maintenance margin Requirement | VaR + 5 ELM | VaR + 3 ELM | |
| 3. | Maintenance margin (% of net funding) | 27% | 20% | |
| 4. | Maintenance margin (INR) | 10,800 | 10,000 | 10,000 |
| 5. | Margin Shortfall = 10-13 | -1750 | 0 | 0 |
