Latest update of 3rd September 2020:
As per the exchange circular, it is decided not levy margin short penalty till 15th Sept, 2020.
In derivative segments, collection of upfront margin from clients has been mandated for a long time. Now, SEBI has mandated the brokers to collect and report an upfront margin even for the cash segment just like the derivative segment. This change was made effective from 1st Sept 2020. Kindly refer to the SEBI and Exchange Circular. On account of this regulation there have been some changes to our RMS system as explained below.
Amount received by selling T1 holding
T1 holding are those stocks which are currently not in your demat account and are yet to be delivered by the Exchange. These stocks will not be delivered on T day (the current trading day) eg. BTST. In case of sale of T1 holdings early payin of these stocks can not be done. Hence, you need to have atleast 40% of the sale value to place the sell order in this case (20% for buy and 20% for sell). Once the stock has been sold, 60% of the sale value will be available the same day to be used for further trading in the all segments (Cash, FNO and Currency).
Ex: Let’s assume you bought ABC stock worth Rs 1000 on Monday and want to sell the same stock worth 1500 on Tuesday. On Tuesday, you can sell ABC stock if you have a clear balance of Rs 600 (40%*1500) in your account. After the stock is sold, 60% of the sell amount of Rs 1500 will be available for further trading.
Intraday profits cannot be used before settlement
Intraday profits can be used only after the settlement. Derivative profits settle on T+1 day and equity profits settle on T+2 days.
Option sale credit to be available to buy only options in the same segment
When you sell an existing option buy position or sell the fresh option position, the premium received can be used to buy only options on the same day and in the same segment. Premium received from equity option sell cannot be used in currency and vise versa. You can use this option premium in other segments after the settlement of T+1 day.
Please note, you can continue using the delivery stock sell amount in any segment (Cash, FNO and Currency). There is no change here.
When would the margin shortfall arise?
As per our current system of equity delivery trades, the full margin is required to take delivery trades. In the new system, Exchanges demand upfront margin and additional margin (if any) to be present in the client’s account to avoid the margin shortage penalty (Same as derivatives penalty charge) in the cash segment. Though we have taken precautions there could still be a few scenarios where a margin shortfall and penalty could arise. So we need to be careful about such situations. Few examples of the same would be as below:
- Intraday position with leverage could not get squared off due to some reason like upper or lower circuit: Let us take an example to understand this better. Assume you have Rs 100 cash and bought 1000 value of ABC stock in intraday on T day with 10x exposure. The exchange upfront margin requirement is 20%. In any case if your order did not get squared off on same day then you are required to maintain at least Rs 200 (20%*1000) in your account to avoid penalty on T day. Since you have only Rs 100, there would be a penalty charged on shortfall of remaining Rs 100 (200 upfront margin – 100 available cash) on T day. In addition to this you would also require to maintain the exchange prescribed additional margin on buy value. This additional margin can be paid till T+2 days. If the additional margin for ABC stock is 3% then other than 20%, you need to pay Rs 30 (3%*1000) by T+2 days. Failing which you are required to pay the exchange penalty on the shortfall amount.
- Failure to do Early Payin: Sometimes there are delays in receiving trade/margin files from the Exchanges. Though Exchange has been extending the time limit for Early Payin in such a case, in case due to this or some other reason, Early Payin could not be processed, short margin penalty would be applicable.