Double Margin Penalty

Why is Zerodha charging interest @0.05% per day for account shortfall ?
Already there is a charge from NSE for margin shortfall.
This is double charge for the same shortfall amount.
Can Zerodha explain?

Margin penalty is a fine levied by the exchange for not maintaining sufficient margins.

Interest is charged if your account goes into debit balance (negative balance) i.e you’ve used more margins than what was available. The interest is the cost associated with this.

@nithin and Zerodha team
Why interest is charged on negative account balance? Are you paying interest on positive account balance?
Also Zerodha is not giving extra money to cover the shortfall margin amount? If Zerodha is doing so then NSE will not charge margin penalty.

Exchanges block full margin from the broker, if client is short. So yes, broker’s margin gets blocked by the exchange. Exchanges charge penalty based on margin reporting - brokers report how much margin a client has in his account end of everyday. So the margin penalty is applied even after blocking the requisite margin from the broker - this is to ensure brokers push clients to have sufficient margins in the account.
This is a standard policy across all brokers.

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As you said exchange blocks full margin from brokers , does it has actual outflow of cash from brokers hand or is it just the type of accounting under which liability is created on brokers part .
And if it does not result from actual outflow of cash from brokers bank account then is it broker who gets to retain interest from the margins which is blocked from overnight cash positions.

If broker is providing the shortfall margin to the exchange then why the hell would they charge margin penalty. If broker is not doing that why is zerodha charging interest for the amount it didn’t provide. The net result is the customer is getting penalty from exchange and also interest charge from the broker for the same amount.

It is actual outflow of cash from broker.

In the 1st place this kind of funding by broker is not allowed hence they penalize.

Broker is funding it though, exchange will debit money from brokers account to make sure no counter party risk arises.

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If broker is paying the shortfall amount why the hell exchange is charging margin shortfall penalty. I hope you understand the word shortfall penalty. Brokers should lodge a complaint aganist the exchange on such practices. The net sufferer is the consumer since we are subjected to double penalty

If this is allowed then broker keeps funding customers for fno and they charge much higher interest charges to clients, this type of funding is not allowed.

Could avoid by maintaining prescribed margin.
There are certain rules and we all should follow them to avoid any structural risk or counter party risk.

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I have a doubt.
Say for example, I pledge stocks and hence receive 10L worth margin. Assuming that I have no cash collateral, and I write a option that requires 2L as margin.
My debit in that case would be 1L, as I dont have that sum with me as cash/cash collateral.
Zerodha will charge me 0.05 % on 1L every day. Is this correct?
Apart from zerodha’s interest charge, what would SEBI’s Penalty be?
Does this change given the new rules set to come-in from today?

Sorry, but I forgot to tag you guys
@nithin @siva


No other penalty.

Thanks a lot.
Could you then please explain, where and when the SEBI penalty comes into effect?

@siva @shubh

The margin shortfall penalty is charged when you use unsettled funds to take overnight positions in F&O, Can read more here.

I bought 93 shares of BEML at price of 1173 on 28/04/2021 and I sold it on 29/04/2021 at price of 1193. By that money I bought share of HUL at price of 2419 and I sold it at 2415 on 29/04/2021. Meanwhile I saw the.share.price of BEML went down. I bought 93 shares of BEML at 1162. I just wanted to know is there peak marging penalty applicable. At eod I can see 20k margin available. Please let me know. What is net profit I made from this trade ans what is penalty if applicable.

Yeah, if you don’t have any additional cash you will be penalised, for more info you can create ticket.