When we sell a stock where some of the shares are pledged, kite first deducts the quantity from pledged quantity. Accordingly margins come down and the point of selling them to to meet additional margin is gone.
I will explain this further.
I have liquidbees which are pledged. Recently since I had additional cash in trading account, I bought liquidbees worth Rs.2lakhs. But I didn’t pledge it again because zerodha doesn’t give instant unpledge option to liquidbees. (I have been asking for this for 3 months now).
Still not a problem because I found it safe. To meet any immediate margin requirement I could easily sell them.
Today morning I had a margin call of 15k. So at exactly 9.15 I made sure I sell these liquidbees. Guess what? The pledged quantity reduced and since there is additional delivery margin my margin went from negative 15k to negative 45k.
What should have happened is the sale should have gone out of unpledged units first. Block 20 percent and then give the remaining amount to meet m2m.
Now I already found a solution for this.
Additional cash if any I will keep it in liquidETF instead of liquidbees. So when I sell
LiquidETF there is no other pledged quantity from which you can deduct.
Today I had to close my other positions to meet margin call. I also gave the solution here.
But don’t you think this can be fixed at the backend to first sell unpledged quantity.
In this case of liquid funds and I found a solution. What if it was a stock? There isn’t an exact substitute there.
Apologies for the delay in response. Don’t know how this got missed.
We’re aware of both the issues you pointed out, however, due to limitations in our current OMS, we are unable to do so:
Allow instant unpledge of cash equivalent securities.
If you have both free and pledged, allow free quantity to be released first so that the collateral margin doesn’t reduce. (However, we do settle free quantity first end of the day)
One correction here, while you might have seen the pledge quantity reduce on the front end, this wouldn’t have reduced your available collateral margin.
But it doesn’t serve my purpose of meeting mark to mark losses right. So you basically asking me to keep extra cash to meet such losses. I keep 10 percent extra just for this purpose. If I keep it in the form of liquidbees, I can get some return out of it.
Am not very sure of this, since I didn’t note the exact margin before and after I sold liquidbees.
But negative margin increased from 15k to 45k. It shouldn’t have right since I sold bees worth Rs. 2lakhs. Even if 20 percent is blocked for delivery margin, I should have got 1.6 L as cash.
