Mumbai, Sept. 5 -- India's tighter rules on bank financing are prompting some proprietary traders to find alternative ways to build leveraged equity derivatives positions, including by using shares held by wealthy investors in their networks as collateral, according to six people, including prop traders and brokers.

Instead of pledging their own shares, the traders arrange to use idle securities held by high-net-worth individuals with surplus shares as collateral in return for a share of the trading profits, according to two of the people.

For prop traders, the appeal is leverage: clients' idle shares can be used as collateral to support larger derivatives positions without tying up their own capital. Investors, meanwhile, get an additi...