Margin Penalty Calculation Clarification

Hi Zerodha Team,

Can you please clarify margin penalty calculation for following case -

Spot price stock valuation (as per previous day closing) - INR 1000.

Haircut as per Zerodha - 20% - Therefore margin available INR 800
Haircut as per NSE - 10% - Therefore margin available INR 900

If one takes a f&o position using margin amount of INR 850, in this case as per NSE if there is no penalty then why do Zerodha deduct penalty from client account (assuming NSE has taken screenshot of 850 INR)?

or

If one uses margin amount of 950 INR, then ideally as per NSE margin penalty should be calculated for 50 INR only then why do calculate margin penalty on 150 INR?

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Is there a way to check if penalties are deposited with the exchange?

Hi @ShubhS9 @siva

Can you please respond on above mentioned questions?

You mean for pledging?

Yes, these 10-20% are just for examples. There are many scripts (stocks & MFs) for which Zerodha has higher haircut compared to the NSE.

Can you give couple of examples.

Some of the examples are -

Scripts NSE Haircut Zerodha Haircut
NIFTYBEES 9.46 11.44
HDFCBANK 13.02 16.49
RELIANCE 14.55 18.02

I am just quoting 3 large cap scripts, but for some med and small cap companies this difference is as high as 70-80%.

PS - I’m am looking for NSE haircut from APPSEC_COLLVAL_05052021.csv daily market report from NSE.

@Nakul Can you please confirm if he is referring the correct haircut file for pledging?

Anyhow coming to your point where is the concept of margin penalty entering here? can you give one example of trade with pledge collateral?

As mentioned in the 1st post of this thread -

If Zerodha’s haircut is more stringent then we get lesser margin for f&o trading. As in 1st post of this thread - example says margins are 800 (as per Zerodha haircut) vs 900 (as per NSE haircut). So, if we utilize 850 margin then as per Zerodha it’s negative balance but as per NSE it’s still below the prescribed margin limit. So, will Zerodha applies a penalty for 50 INR (850 - 800)? (Assuming exchange has captured margin utilization of 850)

Also the same case can be extended - if user utilizes 950 INR margin then as per NSE shortfall amount is only 50 INR but as per Zerodha margin shortfall is 150, so will Zerodha applies penalty for 150 INR or 50 INR?

Is there any way to see the margin shortfall penalty is actually deposited to exchange or is there any way to see how much margin shortfall penalty exchange has applied on the user’s account?

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I think our understanding of pledging needs a small correction.
Anyhow let me go with your example, so if one pledges worth 100000, we give collateral of 80000 instead applying NSE haircut of 10% and should give 90k. So 80k is available in account then how one can take more position than 80k unless they have additional cash?

It’s very common because of intraday volatility margin requirement increases and post taking any f&o position account balance becomes negative, this is where exchange penalizes us with peak margin penalty come into play. I was recently penalized by this penalty amount.

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because of intraday volatility

Is there any way to check margin penalty deposited to exchanges.

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Any reply on atleast this? @siva @ShubhS9 @Nakul

There’s a monthly invoice available on Console. This is a bill for all the charges posted on your account and the GST paid for it.

Zerodha is known for it’s transparency, but I am not sure why they are not transparent in this topic.

We asked -

Also not even replied on - margin penalty calculation logic if there is difference in Zerodha and NSE haircut.

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I suspect there are some “adjustments” that go on from time to time just like how we do adjustments in F&O. It’s probably difficult for them to quantify and justify it as a set procedure…

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If system is designed/instructed to deduct penalty from user’s account then definitely it’s rule based. I agree rule may change from time to time, but at least present rule/logic in place can be communicated to us to keep things transparent.

I can see above nakul replied to it, there is monthly invoice and GST is paid on that, so I guess that should be enough proof that penalty is deposited.

while taking the NRML trade position on monday at 10 am ; i was having Rs.100,000/= clear cash balance and the margin required was also Rs.100,000/= .

after the market close at 3.30 pm ; by the End of the monDAY ; the margin required was showing 110,000/= . .

So , i squared off all the position immediately on the nexday (Tuesday) morning .

my question is : do i have to bear the margin penalty on 10,000/= by the exchange and do i have to bear the interest on 10,000/= by the broker ? Or these both are borne by the Broker ? Or No party has to bear anything ?