As you know, we provide cash to collateral benefit in the ratio of 40:60 for derivative positions. For the purpose of payment to the Exchange, the ratio has to be 50:50.
That means, 10% shortfall of cash component is funded by Trade Smart.
Kindly note, there is a cost involved for maintaining the margin requirement on behalf of client. On account of this maintenance, there shall be DPC applicable at 0.05% per day plus GST on the shortfall amount. In addition, there will be Exchange penalty in case of margin shortfall. Know more.
Case I (No Collateral)
Let’s assume you have a credit balance of Rs.80000 and the margin requirements for your position is Rs.100000. Here, the margin shortfall will be Rs.20000 (100000-80000) and DPC will be Rs.10 (20000*0.05%).
Case II (With Collateral)
Let’s assume available cash = 40000, Collateral value (without haircut) = 1,00,000, collateral value after haircut of 15% = 85000. According to 40:60 ratio, Trading limit available is 100000 i.e. 40000 cash + 60000 (1.5*40000) from collateral. If, the trader utilizes the entire amount of Rs.1,00,000 for trading, then DPC charge will be calculated as below.
As mentioned above, cash to collateral ratio is taken as 50:50. The cash to collateral amount reported to exchange will be 80,000 (Cash = 40,000 and Collateral = 40,000). The DPC is charged on 20000 (@ 0.05% per day) that is the difference of position created (100000) and amount available in your account (80000).
Note: There will not be any margin penalty from the Exchange though as the cash + collateral is sufficient for reporting purpose.
To avoid DPC charge, kindly make the timely payments and save your money.