New Delhi, March 13 -- The central bank's new rules restricting funding to proprietary or prop traders from 1 April could stop the practice among some brokers who carry out trades on behalf of clients on their books in return for a fee, often skirting margin rules.

Certain brokers, playing in a grey area of regulation, were providing additional leverage in the futures and options (F&O) segment to their clients, according to three industry sources.

"While brokers are not permitted to offer leverage or funding beyond exchange limits to clients, in these arrangements, trades were routed through the broker's proprietary desk. Since the positions were taken in the broker's own name [done via the broker's prop book], the usual leverage restri...