India’s capital markets regulator and stock exchanges have put on hold a proposal that would have required traders to pay the entire initial margins before executing even intraday trades, a move brokers said would have hit transaction volumes and made business unviable for many D-Street intermediaries.So, instead of its earlier proposal, the Securities and Exchange Board of India Sebi ) could now allow brokers to part-finance their clients’ initial margin requirements, two people familiar with the development told ET.At present, intra-day traders squaring off their positions on the same day pay only a tiny fraction of the upfront money needed to initiate a trade. Earlier this year, exchanges had asked brokers to mandatorily collect the initial margin upfront even for transactions that are not carried forward to the next day. If the proposal was implemented, brokers would not have been able to offer the popular ‘intra-day trading’ products.These products allowed traders to take far bigger stock bets than they could otherwise afford.Intra-day trading contributes at least 50 per cent of most stock brokers’ daily transaction volumes, industry estimates suggest. Many trades are made without the clients bringing in any money upfront.Aggrieved brokers had met officials from Sebi and the two exchanges after the executive order, seeking relaxation of the amended marginmoney rules. The regulator had agreed to reconsider the decision after brokers brought to its notice the likely impact of the move on trading volumes, said the industry sources.“Sebi has been concerned about the effects of excessive leverage on the system and whether brokers were using one clients’ funds or portfolio to fund another,” said the chief executive of a brokerage that was part of the discussions. “I think Sebi got some initial comfort when we agreed to demonstrate that the money used for such funding would be our own money.”Email queries to Sebi, NSE and BSE remained unanswered.The regulator is evaluating a proposal that would allow brokers to fund 80 per cent of the upfront margins even for intraday trades, said one of the two people familiar with the matter. This means clients would have to bring in 20 per cent of the initial money. Officials from the two exchanges have agreed, sources told ET.“It is up to Sebi to decide how much money it wants to allow clients to pay upfront for intraday trades,” said one of the two people.Firms allowed clients to trade up to even 100 times the initial amount they brought in if they agreed to square off the positions before trading ended for the day in Mumbai.For instance, the value of one lot of Nifty futures is about Rs 9.08 lakh. The exchange-mandated initial margin to buy one lot of Nifty futures is about 11 per cent, which is about Rs 1 lakh. Intraday products by brokerages allow traders to buy the contract for as low as Rs 20,000, which is just 20 per cent of the initial margin.Brokers allowed clients to take intraday bets as these are considered less risky. Intraday products were in a sort of regulatory twilight zone: Brokers were not required to report these trades to exchanges, as traders had to square off the positions before the end of the trading day in Mumbai.Brokers are required, however, to pay a penalty if the initial margins have not been paid for trades that have been carried forward to the next trading day.