well as a broker u provide us with 10 times margin on MIS and 20times on COVER ORDERS ...
my question is -- from where do you get so much money ... you say u have a daily turnover of 3000 crore ... from is so much money coming...
<1>is it that you all broker (RKSV,ZERODHA...etc) have so many big investors .... (an irony that retail traders were not able to participate much in this biggest BULL RALLY)
<2>is it that you people are tied up with big INVESTMENT BANKS who provide you money to give US margin...
<3>is that the market MARKET MAKERS provide you all the funds needed ...(as everyone knows the fact that market makers r above brokers in the heirarchy and they KNOW where the stop losses are and everytime we observe that MAJOR SUPPORT AND RESISTANCE LINES are tested by them)
what is the CATCH over here.... i am not in touch with experienced trades but i wnt to know the answers to these questions that how only foreign investment banks and big big investors r running this MARKET ...so EXPERTS can i have a good answer explaining all the minute details which allmost REATIL TRADER wnats to know.......
Turnover, 98% of the turnover that happens on the exchanges is non delivery based turnover. So if there is Rs 3lk crores of exchange turnover happens on a particular day, only 300 to 500 crores on that will be because of delivery based trading which requires 100% money.
The rest of the turnover happens because of leverage trades, so assume an intraday trader who has Rs 1lk in his account, if he buys and sells with a leverage of 20 times that is a turnover of Rs 40lks. He does it 5 times in a day that is Rs 2crores turnover.
A person buys 1 lot options of Rs 50 and sells at Rs 50. The premium turnover is just Rs 5000, but exchange considers the contract turnover which is Rs 7lks +. So with Rs 50,000 he can buy and sell 10 lots to create a turnover of Rs 1.4 crores.
So as you can see, you don’t really need big investors to do a lot of turnover. There are active intraday traders who very easily do Rs 10crores + turnover a day with just Rs 1lk in their account.
Your question is if with Rs 1lk I am allowed to buy for Rs 20lks, where is the Rs 19lks coming from?
Firstly , you need to realize that most of this leverage is generally intraday and no one gives overnight leverage. You also need to understand that a brokerage will have his funds also kept with the exchanges.
Coming back to your question, when trading equity for intraday, exchange doesn’t ask full money when getting into a trade. So if you as a client buy for Rs 20lks with Rs 1lk in your account, exchange instantly only blocks around Rs 1lk from the brokerage and only if the position is kept overnight will the rest of the money be asked the first thing next day morning. So for equity, brokerage is not really putting any of his money if he is giving intraday leverage.
For futures and options, most brokerages don’t give any intraday leverage for options and for futures there is 2 to 3 times that might be given. So for nifty futures if exchange asks for Rs 25000 per lot and Rs 10,000 per lot for intraday is what a brokerage asks, the remaining Rs 15,000 is usually funded by the brokerage. If the brokerage doesn’t have his own money, he will borrow and fund it. But if you see the market turnover, only 25% of turnover today comes from futures trading. 75% is from options trading where there is no leverage given for intraday.
So, the brokerage in fact funds for Nifty Futures from their pocket upfront to NSE, Cool!
I could see all other trading NSE asks for the same amount as like broker blocks from the client.
Thanks for the explanation.
