Additional exposure margin for scrips hitting market wide position limit. Circular by NSE/SEBI. What is the impact?


#1

Very Important development for stocks that are traded in F&O

After this circular comes into effect from 23rd Feb, expect less no. of stocks to go into F&O Ban

From now on, all F&O traders need to keep a tab on MWPL of the f&o stocks in which they have open positions

Market Wide positional Limit

A stock goes in Ban period in F&O when its open derivatives contracts (open interest) cross 95% of the market wide position limit (total allowable contracts).

It will Also mean the seller of the option will have to pay 50-300% extra exposure margin so it will not be easy to maintain the margin as well as MTM…

Will also mean also Additional margin Will be Required If OI increses ?


HUGE MARGIN INCREASE by Zerodha in 1 DAY
HUGE MARGIN INCREASE by Zerodha in 1 DAY
HUGE MARGIN INCREASE by Zerodha in 1 DAY
#2

There have been operators manipulating stock prices by moving illiquid scrips it into market wide position limit. This is I think a very good move from the exchange. Margin going up will deter people who typically create new positions just to hit the MWPL.

Operationally it will be tricky for both the trader and the brokerage firm, if intraday exposure margin goes up 3 times. Also ability to be able to track MWPL live. We should have clarity on this soon. We will keep everyone posted.


#3

@nithin

Just trying to understand a bit here – will the clients be now notified of increased margin requirements by the brokers ?

OR will positions be closed in the absence of the “new margin requirement” ?

Can you please clarify? Thanks a lot.


#4

Will let you know in coming days as we still have a month on this.


#5

Is this applicable for index derivatives as well, like Bank nifty or nifty contracts ???


#6

Will zerodha increase leverage accordingly ? that is very Imp…small FnO players who trade in 1Lac capital will be not in position to trade. SEBI is just making life of retail traders difficult . AS YOU SAID operators do manipulation of stocks so this step is taken… but you see here retail players will suffer. Just like rich people find innovative ways to hide cash in demonetization and small people have to stand in line for days . This is same going to happen . Operations do not have constraint of money but retail traders do have.
Operators will find way. Retail traders will suffer.
Zerodha have to increase Leverage accordingly and proportionately for the stock who has not reached MVPL of 80% .Or people will have no choice but to borrow of open account to some shady Dabba trading or other broker who give max leverage.
NITHIN Sir Plz REPLY


#8

Not applicable on index derivatives, only on stock derivatives as MWPL limits are irrelevant to index derivatives.


#9

Margin requirements to hold a position overnight can’t be changed, that is as per the requirement of the exchange. Those not hitting MWPL, leverages won’t change.


#10

But That means Those Hitting MWPL ,the leverage will Change ?


#11

Hey @nithin … Is this in effect and implemented by zerodha?


#12

It is implemented by exchange, so it is already in effect. Currently our systems don’t update margin required intraday, so effectively the margins won’t be blocked on intraday basis.


#13

Thanks for sharing this. Today morning I thought that Zerodha doubled the margin requirements of Andhrabank. Now, things look clear. Thanks.