As per SEBI regulations, margin shortage penalty is levied on overnight positions held in trading account without sufficient margin as prescribed by exchange.  For intraday positions shortfall margin penalty is not levied. It is levied in Equity Cash, Equity Derivatives, Currency Derivatives and Commodity derivatives segments.

How is the penalty calculated?

If there is a debit balance per segment per day, and margin amount is less than 1 lac and also margin short fall amount is  less than 10% then 0.5%  penalty on shortage amount will be levied. If the shortfall is greater than 1 lac it is charged 1% of shortage amount.

Penalty per day in %
< Rs 1 Lac and <10% of applicable margin 0.5
≥ Rs 1 Lac and ≥10% of applicable margin 1

0.5% of penalty will be levied for first 3 days of debit. If the shortfall continues to 4th day then the penalty of 5% will be levied for each day from 4th day onwards.

If the shortfall is caused due to movement of  3% or more in nifty on any trading day then the shortage penalty will be charged only if shortfall continues to T+2 days.

Example:

With the available balance of Rs.10000, there is an overnight future position created with the margin of Rs.10000 on T day (This included span and exposure margin both as per exchange requirement). Due to market volatility, account is debited with the loss of Rs.2000 on same day. In this case, though the amount is less than 1 lac but the shortfall is greater than 10%. Hence, 1% penalty will be levied on the shortage amount (2000) on T+1 day. On each day till T+3 day the debit amount would be Rs.20 (2000*1%). If the shortage continues then from 4th day onwards the debit amount would be Rs. 100(2000*5%).

Comments

  1. Mohini Arun Chaudhari your client ...

    How to sell options initially…and then buying the same at lower rate to gain profit….what are the fund requirements in this case? kindly illustrate with few examples….

    1. Trade Smart Online Article Author

      Hi Mohini Arun Chaudhari,
      For selling any options, you would required to pay exchange prescribed marging which is approximately equal to a Future Margin.

      Example: Let us assume you are selling 1 lot (75 qty) of Nifty options, December expiry then margin required is around Rs.15800 for intraday and around Rs.47500 to carry forward(Overnight). Margin requirement through Cover Order is around Rs.9500. You may also calculate margin requirement for options trading from Margin Calculator.

      For more information about options trading please refer NSE Paathshaala.

  2. jayesh varma

    I bought options with money got from cash market selling.My ledger is positive for the day.Is margin shortfall applicable for the day?if so how much?

    1. Trade Smart Online Article Author

      Hello Jayesh Varma,
      Margin shortage penalty is applicable after considering haircut %(Risk factor associated with stock). Let us consider an example.
      You sold 10000 value of xyz stock. This stock has the haircut of 40%. After haircut the share value comes to 6000
      Case 1: If you buy option of worth 5000 then there will be no penalty charged to you. Because the value of share is 6000 and you are utilizing only 5000.
      Case 2: If you buy option of worth 8000 then the shortage is 2000(8000-6000). Penalty will be applicable on shortage amount of 2000. Above article would brief you how the margin penalty is calculated. Please let us know if still you have any questions.

      Hope this is clear to you.

  3. Amrish Charaniya

    If i have create option position for intraday and same i have squared off on same day also book mark to mark loss so pls confirm is penalty will be imposed or not??

    1. Trade Smart Online Article Author

      Hello Amrish,
      In case of your example, if you incur loss and your ledger is debit due to this loss then you will be charged margin shortage penalty. You may refer Margin Shortage Penalty article for more information.

    1. Trade Smart Online Article Author

      Hi Bhagwan,
      We provide 4 times exposure in equity delivery provided if your account is active in EquiMax. In case you use product type CNC for buying stocks in delivery then no margin is provided, you are required to maintain full amount in your account.

  4. aditya

    i ve shold 3 lots bank nifty PE intraday and make a loss of 14000 rupees mtm .my broker had sqare off my possition insame day.and total losses was deducted from my trading acccount.it fine but in next they sent me msg you have span mirgin shortfall of15700 and is sujected to penalty.and deducted 157 rupees from my trading accont .is it legal sir please help me.i shall exhaust my total trading accont .if they deduct it as daily basis

    1. Trade Smart Online Article Author

      Hello Aditya,
      As per the trade that you mentioned, it seems that you had a negative balance due to derivative trade. In such cases you will be charged margin shortfall penalty. Request you to share your client ID, we will check out your transaction and let you know what exactly has happened.

      1. Akhil

        Sir even i have same problem Dear Client T41067 Trading Date: 17-AUG-20. Your tentative margin shortage is Rs.25182.5, please reduce your position or pay to avoid penalty. Please helpme sir my number is 7702620631..

        1. Trade Smart Online Article Author

          Hello Akhil,
          Looking at your Client code, it seems you have an account with other broker. At TradeSmart the client ID starts from “Y”. We’d suggest you to contact your broker for more details.

  5. Vivek

    What is the margin requirement for option strategies with limited loss? Is the benefit of reduced risk given by reducing margin or margin will be calculated as if every option writing is done individually?

      1. Vivek

        I am not asking how to limit loss. I am also not interested in intra day trading. I would like to carry forward the positions till expiry. I wanted to know margin requirement for limited loss strategy like spread orders. Margin calculator shows as if only naked short options are in portfolio. Margin calculator does not account for limited loss for the selected strategy. Please clarify if margin requirement is just maximum loss for a given strategy or simple arithmetic total for short options?

        1. Trade Smart Online Article Author

          Margin requirement would be the maximum loss for your short options. Kindly provide your contact details so that we can explain you in detail.

  6. Nikhil Anil Thombare

    I have selled put of jublient food of premium 2150 @3.35 now there is margin short fall and it is totally a dry counter .i have 15000 in my account suppose those 15000 are now over and I still haven’t completed margin short fall then as per the sebi rules what can happen at the last stage if I don’t cover that margin short fall plz reply as soon as possible

    1. Trade Smart Online Article Author

      Hello Nikhil,
      In case of margin shortfall, you are required to pay the amount to the extent of shortfall. As explained in the above article, you will be changed daily penalty and penalty % varies as per the margin shortfall amount and for how long the shortfall is continued.

  7. dharohar sharma

    I have sell nifty option of 11700 PE at @ 12. and carried it to the next day. and i have only 60000 thousand in my account . and margin for shorting nifty option is around 100000 and so how many penalty will be charged on 40000 thousand shortage of margin ?

    1. Trade Smart Online Article Author

      Hello Dharohar,
      According to your example, your shortage is 40,000 which is greater than 10% of margin required (1,00,000). Hence on T+1 day you would be charged a penalty of 1% on 40000 i.e Rs.400. If you do not transfer the funds to recover the shortage then penalty will continue apply each day as per the % mentioned in the above article.

  8. Rohini Chavan

    Hi,

    If i had purchased 10 lots of nifty intraday on friday and has only 1 lakh in my account and the shortfall is 9 lakhs. Now if broker squares of my 9 lots on coming monday by 10 or 11 am then do i have to pay penalty on 9 lakhs which is margin shortfall?
    Also does the broker issue any invoice for the deduction?

    1. Trade Smart Online Article Author

      Hello Rohini,
      We do not allow to carry forward intraday position to next day. All intraday positions will be squared off on same day. Any MTM loss need to be recovered on same day. In case of any carry forward positions and there is any margin shartage then you are required to make the payment as soon as possible to avoid daily penalties. In case of any margin shortage, we send you provisional penalty email on your registered email ID and a notification on Sine mobile app on the trade date itself.

  9. Pingback: How is the margin reported to exchange for derivatives trading? - Knowledge BaseKnowledge Base

  10. Balaji

    I taken 250 shares idea @4:85delivery=1214 hold 7 days then sell 250 @5:45 =1363but broker showing me 250 @4:65 then he made hair cut & margin short fall at last I got 550 in my account y?even I sold profit but y received only 550

    1. Trade Smart Online Article Author

      Hello Balaji,
      Kindly share your client code. We will check the order details in your account and inform you about your query.

  11. Brijj

    Hi Sir,

    I recently start trading, and buying ans selling shares weekly, but recently I got message “Dear Customer, Total Margin shortfall for cash segment is Rs. XXXX.XX, please pay”. I did not get this message, can you please explain me in a simple way, I’ve searched everywhere but not able to understand this.

    1. Trade Smart Online Article Author

      Hello Brijj
      We would like to check the transaction details in your account. Kindly share the client code. We shall check and update you about the email that you have received.

  12. Rahul Singla

    Hello, I have sold 1000 share at rate 111.55 with NSE (margin), but forgot to buy the those share on same day. what is process to buy and is there any penalty?

    1. Trade Smart Online Article Author

      Hello Rahul,
      If you sold in delivery product (CNC product type) then system allows to place order in CNC only if you have holdings in your account. In this case you will not be charges any penalty.
      If you have sold shared in intraday (MIS product type) then the same might have squared off by the system on or after 3:10 pm at the prices available in the market.
      In case if no seller is available in while squaring off your order then there might be a chance of auctioning of the shares that you have sold which is termed as short delivery. If the shares are auctioned then there might be penalty levied to you. Kindly refer to our another article on short delivery

  13. rahul

    sir,
    This message has arrived.
    Dear Customer (R……), Total Margin shortfall for Cash segment is Rs.-196.44. Please pay
    sir, What do i do plz help

    1. Trade Smart Online Article Author

      Hello Rahul,
      Kindly share your client code. We shall check this and update you on the same.

  14. Pingback: Upfront margin collection for cash segment just like derivatives - Knowledge BaseKnowledge Base

    1. Trade Smart Online Article Author

      Hello Abhay,
      Currently the shortage margin for cash segment shall be applicable from 1st Sept 2020. Please share your client ID or you may use our online chat support. Our team shall check the same in your account.

  15. Akhil

    Do we have to maintain a margin in case of buying options for delivery after already paying 100% premium upfront?
    Will we be required to maintain any margin due to the daily fluctuation in MTM?
    I am asking in case of option BUYING for delivery after paying the complete premium.
    Thanks!

    1. Trade Smart Online Article Author

      Hello Akhil,
      You are not required to maintain any other amount after paying full premium.

  16. Pingback: Upfront margin collection for cash segment just like derivatives - Knowledge BaseKnowledge Base

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