Can i use my cash component fund whenever i have futures contract MTM shortfall of margin? (E.g-; i took nifty futures position from the existing funds and then, . i pledged the fund that wasn’t used in that position and after that for first day at EOD MTM was settled by some funds i had but on day 2/3 when my pledged amount came in can it be use for EOD MTM margin considering the fact that the price went against me even on day 2/3?)
The collateral margin you receive from pledging cannot be used for settling losses, even if it’s considered cash equivalent. For settling losses and charges, you will need cash in your account.
If you don’t have enough cash in your account, this will result in your account going in debit balance, on which interest is applicable at 0.05% per day.
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What about PEAK margin penalty (or whatever its particular name is) ; impose by exchanges after i took entry. (suppose the volatility increases massively and there was no MTM loss settlement margin issue but the initial margin requirement issue imposed by the exchanges ) could that margin penalty be paid off by my extra pledged funds? and as brokers are responsible before entry of client, this margin increase has happened after the client got into the trade so he is liable of the margin penalty, thus for that penalty can the client use the cash component pledged funds?
If the margin increases after you take the trade, in that scenario, the penalty is applicable on the broker, not the client. Explained in detail here: NSE Circular on Short margin penalty refund - #26 by nithin
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@ShubhS9 Can you please answer the below?
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Cash equivalent collateral amount (say, pledge liquidcase) CAN NOT be used for MTM losses. It CAN be used only for entering the trade i.e SPAN + EXPOSURE margin. Please correct me if I am wrong.
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Consider below example.
Day1: I have 2L cash in my trading account. I sell a call option which requires 2L cash. Balance amount = 0.
Day2: pledge liquidCase worth 2.5L. Assume the cash equivalent collateral margin received = 2L
So, now my question is …can this cash equivalent collateral amount replaces my original cash and give me back 2L in my account. If so, this can be used for MTM losses.
@ShubhS9
Apologies for the delayed response. This is right.
Yes, the margin will be blocked from the cash equivalent collateral and your cash balance will be free and can de used towards MTM losses.