Interest and margin

#1

Assuming I have some holdings worth 5 lakhs that have not been pledged. I take a position in a futures/options contract with adequate initial margin. The position turns against me and there is negative m2m and the cash balance comes down. Can the broker allow me to hold the position overnight and then charge interest? By letting me hold the position is the broker not contravening the SEBI guidelines discussed on zerodha that mandate the broker to ensure adequate margin to cover the m2m, span margin and exposure margin? Please reply along with any reference to circulars or rules and regulations governing the brokers’ conduct. Thanks in advance.

#2

Exchange/SEBI allows to consider stocks that are lying in demat to be considered for margin, if you have given POA in favor of the broker. Btw, the onus is on the user to make sure there is sufficient funds in the account. I am guessing in your case, if he hadn’t considered the stocks in your demat as margin, you would have had to pay short margin penalty to the exchanges. Short margin penalty is usually much higher.

https://www.nseindia.com/products/content/derivatives/equities/penalties.htm

#3

Thank you sir. But my doubt is if the broker can carry forward my position when funds are inadequate and when there is no pledge. I understand the short margin penalties but the position would have closed on the day the margin fell short and the penalty would not be as high as the interest charged for a longer duration. Does PoA imply that the broker can sell my shares unilaterally and without my consent? Kindly reply soon sir. To my knowledge zerodha sends an sms and email instantly when ever the margin falls short and in all probability will be square off at the end of the day under RMS. If broker allows carry forward of the positions without squaring off under RMS then it is very dangerous because I can sell my shares offline also.

#4

I am awaiting your reply.