There are various
investors and there are traders in market. Investors either bring in entire
money required to buy a stock or hold entire stock in their demat account
before selling. Such type of activity carries zero risk to the brokerage firms
where the investors transacts.
Majority of
traders though are usually leveraging either using futures and options, margin
funding, or just intraday trading stocks with a small upfront margin. This
activity brings in risk to the brokerage firm where the trader transacts. The
risk being, the margin being put to transact could potentially be lesser than
any marked to market losses that could happen on the trade. The chances or this
happening are much higher on the event days when market can get extremely
volatile on purview of any unexpected news.
Hence all brokerage firms on such days reduce
the leverage and ask for higher upfront margins from their customers to reduce
the risk in the system.
Tags
News and Event