Rules from the Reserve Bank of India that took effect on July 1 mandate 100 percent collateral for bank guarantees. The changes are expected to raise costs for proprietary trading firms.
The regulations apply to bank guarantees used by these desks, which play a key role in market activity. Firms now face higher funding costs and narrower profit margins.
Industry experts have warned that trading volumes could decline and some positions may be cut as the cost of capital increases. A number of firms have asked regulators to review the requirements.
The rules target proprietary trading operations that rely on such guarantees to support their activities in Indian markets.
