Margin shortfall penalties accounting craziness


I have a huge issue in terms of number of times margin shortfall penalty charged vs. margin statements. I have created a support ticket #### #20220108236723.

However my past experience with support ticket was pathetic, and this being super critical for me, I wanted your attention, and answer if you can. Appreciate your looking into this accounting issue, and response. I am also thinking of filing a complaint on this with SEBI.

Thank you,

Hi, @DS1567

Please note that all Stockbrokers are required to report to the exchange margins available in the client’s account against the margins required for positions. This process of informing the exchange of the margins available in a client’s account is referred to as ‘Margin Reporting’

If the margins available in your account >= margins required by the Exchange, there won’t be any penalty is levied. But If you have insufficient margins, the exchange will charge you a margin penalty to your account.

There are 2 types of shortfall:

  1. EOD shortfall

  2. Peak shortfall

EOD shortfall - The easiest way to keep track of any shortfall is by looking at the daily margin statement.

Peak shortfall- To arrive at an intraday peak position margin, clearing corporations (CC) will randomly take 4 snapshots during the day of all the margins. These snapshots will be at random intervals & system-driven, No broker in India will know the timings of the snapshot taken by CC.

The highest margin out of these four snapshots will become the peak margin required of the day. If the available margin in your account is lesser than that penalty will be charged.

The broker gets the file called MG13 at the end of the day from the exchange in which the peak margin required for each client will be mentioned against which the broker has to report the margin available in clients accounts, any difference between the required and available margin will be a shortfall on which penalty will be applicable at the given rates by the exchange

Please note that the Short margin penalty is applied by the exchange and not the broker so the broker will not be in a position to refund the penalty.

Margin statement will show the shortfall based on End of the day, the same doesn’t show peak margin shortfall.

To know more about peak margin please go through this post.

Please check the reasons which can lead to the shortfall, and always maintain sufficient funds to avoid any kind of shortfall in the future.

We shall reply to your ticket with the details of the penalty.

1 Like

Is the penalty paid to NSE or SEBI?

This peak margin penalty - is a weapon created against retail traders. Brokers should have displayed some spine, and gotten this thing out of retailer’s way. Instead of making markets stable, this measure only helps nse/SEBI eat away more money from retail traders for temporal shortfalls and not even real in most cases (like end of the day or what margin was finally sufficient).

Also, there are transparency issues to add to the pain. Why cannot they share when the snapshots are taken, and also why cannot they charge the penalty following day at least for us to know. The penalty charge occurs on 7th or 8th day after event occurred. Why would retail traders need to go through this hassle in the first place at all? SEBI wants to spy, and you brokers are keeping quiet because you have nothing to lose?