Cover order as a product will continue. But you will not get any additional margin benefit because you used cover orders.
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So, SEBI allows trading using VAR+ELM, which is around 22% of trade value for Reliance. What they are saying is that, brokers can’t allow trading by collecting lesser than this 22%, just because it is an intraday trade.
@nithin @siva
What if i have 10k in my account and want to trade escorts in equity segment with cmp@1120. can i trade in equity ? will i get any leverage on it? or its simple maths of 10000/1120=89 shares i can trade?
Margin benefit is different from intraday leverage dear.
Margin benefit is for hedged positions in FnO.
will this have any effect on option premiums? less intraday option selling =higher option premiums? @nithin @siva
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aah thats great clarification…my head started spinning when i read SEBI pdf, they should have worded like you did 
Cheers!
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Hi Nitin,
What about
- margin requirement for btst trades?
- Margin blocked for selling of stocks in demat?
Ah… I am going to start deleting these type of lame questions from now.
Like I have explained in the post. Look at this doc.
Search for Escorts, you will see that VAR+ELM is 22%. So this means that to buy 1lk of escorts you need 22k. Or with 10k in your account you can buy around 50k of escorts.
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Buying today to sell tomorrow means you’re paying full margin anyways so no difference.
why would any margin be blocked if you’re selling stocks from your holding?
read the main post again dude, it’s not going to effect either of the 2 points you mentioned.
So VAR+ELM which is 22% margin will be available after August 2021? So still we get 4x leverage for intraday equity trading?
Because in your first post it’s mentioned from Aug 2020 itself VAR+ELM is coming to effect.
Please clarify
Many shops will shut down, like Paid Webinars, Referral Account opening brokerage, etc.
Lemme be a fiction writer.
So we have 3 companies
- ICCII bank
- ICCII Sec
- ICCII NBFC.
I have 3-in-1 account with entities 1&2. My account has 1 lakh rs in it. On expiry day I opened my terminal, opened order entry for, Sell option worth 10 rs with SL of 20 rs. I wanna sell 7500 qt. Now this requires 150 Lakhs margin.
Now I have unsecured line of credit opened with entity 3. Using some mechanism (manual or automatic) I am directed to a web page of entity 3, where i agree and my account gets credited with required amount.
Entity 1 has blocked all sorts of transactions in the account OR money credited gets automatically allocated to trading and I cannot unallocate it.
Order is placed. ICCII Sec has “collected” money from me.
As my SL gets hit, position is squared off.
Loss of 75k is booked. ICCII NBFC forces me to manually return all the credit.
I am left with 25k and my ruined future.
This minimum requirement of VAR+ELM by the exchange, is it only for intraday based trades? Or does this also imply for delivery based trades as well? Just trying to understand whether leverage on delivery based trades which other brokers provide will get affected by this move or is there something more to this?
What happens if the trader removes the SL or converts the trade to NRML? He can clearly say I’ve money in my account, I am ready to lose that much money, the NBFC has no right to stop me from losing my money, a broker now can stop the conversion or close the trade if client capital is not enough or fully blown when is using broker funds for leverage, but NBFC loan will be considered client capital, and they cannot interfere. They then have to legally pursue you for loan recovery. How many retail participants do you think will understand that and use that loan responsibly, too much headache for NBFC for not that much return. This assuming if that’s even possible.
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currently what is the ratio of intraday trades to carry fwd trades in index option segment? @nithin @siva
Nope. If you go thru the main circular on cash margin that came out in November 2019… it requires margin on both legs of the transaction.
In a btst trade, if you buy an asm category stock, where exchange margin requirement is 100%. You will not be able to sell the stock on next day without additional 100% margin in your account.
- if you sell your demat holdings today, you give 100% sell value to purchase stocks on same day.
You will not be able to do so going forward as you will need to block margins on sale of holdings also.
Eg: sell 1 lac worth of hdfc bank holdings, you will have to block var+elm margin post selling from the sell value released for 2 days… So if the var + elm is 20% on hdfcbank… you will get only 80k worth value as margin for transacting further on the same day…till t+2 days…
Check recent nse circular on this… issued this month…
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@nithin are you sure there will be 0 leverage come Aug 2021 or are you expecting more rules that will clarify max peak margin after Aug 2021?
Brokers has already come up with products types where such mischiefs are not allowed.
In my example I have 1 lakh in my account. So ICCII allows me to tweek SL as much as 100000/7500+10 = 23.33. Not more than that. Also coversion of product types from MIS to NRMl etc also not allowed.
Also broker have a internal system to segregate the margins available as per the sources. So Broker can designate my cash as Margin A which will be used for all RMS calculations. And Loan as margin B to fulfil collection of margins.
Upfront collection of VAR + ELM is coming into effect in August 2020, but brokers can still provide extra leverage without any penalties, which will start changing from December 2020 when there will be penalties for short collection of margins.
Dec 2020- Feb 2021: Penalty if margin used <25% of VAR+ELM
Mar 2021- May 2021: Penalty if margin used <50% of VAR+ELM
June 2021- Aug 2021: Penalty if margin used <75% of VAR+ELM
Aug 2021 onwards: Penalty if margin used < VAR+ELM
Read the first post again, you will understand.
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