How to avoid quarterly settlement to have funds for intraday trading?
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If you utilise all your funds then there won’t be quarterly settlement. If you use only a portion of your funds say you have 100k in your account and used only 25k broker will retain upto 125% of the funds used ie. 31250 and remaining funds will be credited to your bank account.
If you have pledged shares: If you utilise full margin alloted to you there won’t be any settlement, if you use only a portion of that margin, say you have 10lakhs margin and use only 2.5lakhs, broker will retain upto 2.25 times the margin used, so for 2.5laks used broker will retain 5.62lakhs and shares worth remaining amount will be unpledged and sent back to your account.
Now to retain all 100k balance you have to utilise at least 80k worth of funds and to retain full 10lakhs worth of collateral you will have to use 4.5lakhs worth of margins.
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Which day i have to use all margin ?
Don’t know about other brokers but this is how Zerodha does it
Sir, I got the point but isn’t there any other workaround to it. I position size my trades in a way that even if there’s a loss I have funds to trade and cover it. So trading with half capital and retaining other half at any given point is crucial.
These are SEBI mandated rules and every broker has to follow them. Only workaround to this is to use 80% of your cash balance and 45% of your collateral margin to avoid quarterly settlement.
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Hi zerodha team. I notice zerodha has changed the structure of quarterly statement since Q4 2019-2020. It doesn’t match with what is mandated by NSE. Refer to the link and images below
For the clients having outstanding obligations on the settlement date, a member may retain the requisite securities / funds towards such obligations and may also retain the funds expected to be required to meet margin obligations for next 5 trading days, calculated in the manner specified by the exchanges.
Accordingly the following funds / securities may be retained by a member at the time of settlement
- entire pay-in obligation of funds & securities outstanding at the end of day on date of settlement
- funds / securities to the extent of value of transactions (gross turnover) executed on the day of such settlement in the capital market
- in derivative segment apart from margin liability as on the date of settlement, additional margins (maximum up-to 125% of margin requirement on the day of settlement) . The margin liability shall include the margin collected by the Member from their clients as per the risk management policy and informed to the clients.
Now zerodha used to account the second point i.e. retention of securities to the extent of value of transactions done on the day of settlement . But post Q4 they have changed the structure which has created issues for intraday traders who keep cash or pledged securities. Attaching the picture of old way zerodha handles retention.
So the difference is ‘T Day Turnover in CM’ has been replaced by ‘225% T Day margin requirement in equity segment’ which i believe only uses overnight margin blocked for CM. Now this where problem arises for people who trade intraday and have funds or pledged securities and unnecessarily have to go through quarterly settlement even though they are actively trading and using the margin .
Can someone from Zerodha please check this urgently and rectify it as it was done earlier/as mandated by NSE on it’s website so that active traders don’t have to go through this again in Q2 .
Attaching the image of the way retention process is handled now. The difference is in the last row which creates unnecessary issues for active intraday traders.
@ShubhS9 @siva @VenuMadhav @nithin
No updates or confirmation yet regarding the discrepancy mentioned above. Can you please check and update. Thanks
We are working on showing you a tentative date range within which your account will be settled, this will be available on Console, give us a few days. Will update here once it’s live. This will help you plan your trades/availability of funds in account.
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Thanks for the update @VenuMadhav . Knowing the date for quarterly settlement would be extremely helpful. Also when is the the instant pledging going to go live. It will be helpful as well as the settlement day on which securities will be unpledged , we can instantly pledge them back. Once both of the changes go live then quarterly settlement won’t be that big of an issue. Thanks
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New pledge system will go live from August 01, we’re yet to get clarity from Exchange if under the new system quarterly settlement is required for securities, since the shares will be in client’s own demat.
Suppose, I’ve 10L in my account, of which 8L are from pledged Liquid Funds & 2L as cash. I’ve sold 8L worth of options overnight.
a) Are these 8L from the pledged amount totally? Because if they are, then 80% cash balance requirement wouldn’t be fulfilled.
b) Or this is 6L from Liquid Funds & 2L from cash? Because in this case, both 45% collateral & 80% cash requirements are being met.
I usually do far otm call spreads for the full margin to avoid Russ quarterly settlement
Since Liquid Funds are considered cash equivalent, chances of scenario ‘A’ playing out are more.
Right, then that would mean your whole account is ‘cash account’. And for that, you need to have 80% overnight position (not 45).
@VenuMadhav, can you clarify this once? If there’s say 10L (8L Liquid Fund + 2L cash) in one’s account:
a) Would that mean one needs to use 80 % of the balance overnight?
b) If not 80, then how much? 45% ?
Your account balance is looked at as the sum of cash+collateral. If after applying NSE’s rules, if the funds that can be retained > account balance, then your quarterly settlement happens by way of deemed settlement. If there’s excess, funds and/or securities will be transferred back.
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Sorry, but that’s just too much jagron. I think I got it but can you clarify that wrt the example above?