To solve this problem, the risk management system (RMS) should not allow the exit of any position if the post-exit margin required for the portfolio goes up and if the customer doesn’t have sufficient free funds. Until now, no RMS globally that I know of has the facility to do this check while a customer is exiting positions.
Replying to this comment @nithin
Finvasia is doing this already. They don’t let you exit hedges unless you have enough margins in the account.
Hi @nithin there can be an intermediate, less complex step. May be this has been discussed, but restating…
to introduce another order flavor call it ‘Margin-locked basket’ order. Once the client puts his instruments and prices, and submits the order, the margin and the instruments gets locked.
In such orders, while exiting it can be only in the order at which margin doesnt dip/go -ve.
The order validation-step of zerodha can calculate and arrange the entry and exit orders of such a locked-basket.
This will be lighter, wont clog the leased line and the customer knows what type of order he is getting into.
Lock the order basket → validate basket and create the trade sequence → lock the funds → enter the trade sequence → if (exit_basket OR short_margin) exit the trade sequence → release the funds
Am sure for zerodha tech team, implementing this is a weeks work and throw in 3 weeks of testing, should be ready in a month.
Or does this new flavor of order needs to be authorized by SEBI/Exchange or is broker free to do such flavors within the permissible/existing framework.
Sorry to bother if this is discussed already.
Good to know the workings of backend with your sincere efforts to explain them here.
Lets say I take a call spread on friday which is OTM, and still it remains OTM on wednesday, does the margin remains same If i wanted to carry forward for thursday(still remains OTM on thursday) or will there be a change in margin requirement.
@nithin honestly you need to refund the penality amount back to the client - that the circular say - see one brokere really recredit the penality to the clients - @nithin you people always follow the rules and regulation why in this circular you are mimicing - refund the amount you charged
@nithin you know i raised this complaint so many times to nse and sebi about broker charging penality from clients , they also reply to me about we are in this matter - and resolved soon as posssible- one more our voice are heared from SEBI
if you are not refund i will apply in score
Yes - There will be change in the margin requirement as an when the broker updates the SPAN file. Since you have taken a credit spread the changes will be hardly felt.
The deep impact is felt only for players who have taken a naked position, leave alone overnight - intraday itself there will be change in margin requirements
I think there is a reason zerodha is not implementing this logic. And i appreciate that.
There are thousands of trades happening between 3.25 to 3.29.59 PM mostly by Algos or APIs. When such a check is in place it will impact the trader’s order flow.
Believe me those who are relying on algo to exit trades at market prices will not have time to check if their orders were executed or not. If they go to the orders page to see the queued orders, modify them, check the positions tab to see whats remaining - will take more than 5mts.
For traders placing less than 1 order per minute - it sounds reasonable. When you have 10+ orders a minute - a logic to impact the order flow will not serve the purpose
@nithin is my assessment accurate?
As i checked now its coming around 35800 for 1 lot in nifty, Lets say I have a capital of 40k and I am in profit since friday till wednesday, which means this 40k is enough and the margin will not cross 40k on thursday. Is that right.
You have a safety margin of more than 11%. The only way for this to exceed is when the implied volatility shoots. Since its nifty, VIX may represent with near accuracy. India vix is safely below 20. A move above 30 may bring a meaningful difference in margin requirement.
Even if the market moves against you the margin requirement will not swing that much.
I speak from experience only. None of the brokers, exchange has provided the accurate margin calculation wrt IV or how and when they update the dynamic SPAN margin
thanks for the response,
agree, happens often, which when I have to slightly change plan, infact the most confusing and irritating part during trading
The restriction is mainly because there is an open interest restriction for a broker at the exchange. But we have seen that while this wasn’t the intended outcome, not allowing deep OTM options is generally helping our customers overall. Deep OTM options are by far the riskiest product.
But for your use case, the best bet is to open a custody account with us. Check this post:
This isn’t as simple as you have made it out to be, if it was, we would have already done it.
If you are trading index options, it remains the same. For stock options, the physical delivery margin starts going up as you head into the expiry week for all long ITM options.
All brokers are representing this topic for reasons I have already explained above. I might be conflicted, but even looking at the issue from a neutral view, I think it isn’t right for brokers to be charged a penalty when a client in control decides not to act on a certain rule in terms of margin requirement. It is almost like asking the guys who have built the road to pay penalties for folks driving over the speed limit. 
But that said, if the petition is rejected, we will refund. We will get to know in a few weeks.
I am not really sure how this is implemented with this broker. As I mentioned right at the start, the most complex piece of this is to do it at scale, with millions of orders across millions of clients. A smaller broker with smaller customers can potentially implement this, but if it is not done right, on volatile days it creates huge risks in terms of order slowing down and choking the entire system.
A scam is where someone makes money somehow by cheating someone. As I have mentioned earlier, the margin penalty & all types of penalties are collected and paid to the exchanges and goes to investor protection or settlement guaranteed fund. A broker doesn’t make any money out of this, and as I have mentioned earlier, this is one of those regulations which is currently impossible for brokers to comply with unless the client cooperates.
I guess the reason behind having clickbaity articles is to get more people to click on them, but this is like bad journalism. The reason influencers have become popular is because folks following them expect a neutral balanced opinion, but if influencers start saying whatever to get views, eventually, the bad content will catch up. I haven’t seen this video; I am saying whatever based on the title.
As much as I want the penalty to be refunded, I feel my broker shouldn’t be the one paying for my faults. Best is for exchange to refund the penalty. Come on. They were never supposed to earn this in the form of revenue.
Not sure if exchanges have to pay SEBI or some investor protection fund. But if it’s going to them as revenue then it’s best they refund in the best interest of all parties.
Spend your precious time on something that’s worth it !!! 
oh! I thought it must be anther basket order. But locked and all the complexity is frontloaded at validation.
Can split that validation step too couldnt help? validate and again present it to the user… like submit-to-validate and submit-to-execute
Just a thought… can there be a problem statement and bottleneck points be made available by your tech team? Kailash Nath -et al?
you may hide your trade secrets -etc but still state the problem’s critical paths/load points out.
May be public on this forum is good enough to nudge towards a solution???
Thanks for your response, yes I was talking about index options. good to hear there wont be any change.