Collateral Damage: Proprietary traders feel the squeeze under RBI's new rules

Collateral Damage: Proprietary traders feel the squeeze under RBI's new rules

Mumbai: Proprietary trading desks are bracing for challenging times as the Reserve Bank of India's new rules requiring banks to collect 100% collateral against bank guarantees (BGs), effective July 1 is seen increasing funding costs and squeezing profitability.These firms, which trade with their own capital, use a bank guarantee to put them as collateral with exchanges or clearing corporations for margins. It allows them to meet part of that collateral requirement without parking the equivalent…