Can Zerodha fund the exposure margin(give exposure margin benefit) to buy Nifty futures, i.e for ex if I have 33k the SPAN margin in my account, will Zerodha allow me to buy 1 lot of Nifty futures for overnight position. I am currently trading with angel broking and they allow this.
To take F&O positions (intraday/overnight), exchanges ask for the entire SPAN + Exposure from the broker. So for Nifty fut 33 SPAN + 19 Expo = 52k total. Zerodha allows you to buy intraday with only 40% of this amount (using MIS/BO/CO), they are essentially funding the client. So with 20k (40% of 52k) they allow him to buy 52k. So this 32k gets blocked from Zerodha’s margin. They don’t/can’t charge any interest for this 32k. They are forced to do this because it is a norm among all brokers.
Brokers report margins to the exchanges on end of day basis, so even they let their clients buy for more than what they can intraday, exchanges are okay. But at the end of the day, Zerodha has to send a report to exchange saying how much money held by a client and for how many positions. Exchanges charge a penalty if the amount blocked is less than SPAN (33k in the above example).
What some traditional brokers do is, they say we will allow you to carry overnight position at only 33k (SPAN) and they will fund this remaining 19k exposure margin. The reason they do it (their 19k would have earned interest overnight otherwise) is because they charge a % brokerage. So even if they lose out on interest, they earn much more in brokerage.
Zerodha doesn’t allow this. To hold overnight they ask for entire SPAN + Exposure. Reasons being- 1. They don’t earn a % brokerage and 2. By not blocking exposure the broker is taking a much higher risk in case markets moves up/down suddenly.
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