@nithin @Meher_Smaran @ShubhS9
Is it possible that you pay the shortfall margin amount to exchange for that case on the 31-12-2024. I will pay the interest that is chargeable to zerodha for the margin amount. In that case we can avoid the margin shortfall penalty. Please try this option because margin shortfall is too high to bear for me.
This is scary. I thought the penalty was 1% of the shortfall? So did you have margin shortfall in crores? How did the RM team even allow it to reach that stage?
We understand and empathize with your situation. However, these charges are levied by the exchange and cannot be refunded once applied, as they are collected by the exchange.
The penalties are enforced in accordance with the exchangeâs circular, and we are required to comply with these regulations.
For the future, we recommend the following to help you avoid such penalties:
Maintain sufficient funds in your account at all times.
Promptly add funds whenever you receive a notification to do so.
If you hold hedged positions, consider closing the leg with higher margins first to minimize the risk of a margin increase.
Our team has shared the detailed break down of the margin shortfall via ticket. Kindly go through it and let us know if you have further queries.
I will seek clarification from SEBI and nse exchange and raise this matter to them.
sometimes margin requirement message comesâŚwhen there is excessive loss intraday in live situationâŚis this scenario also applicable for margin penalty @Jyoti_P_Deshpande @Meher_Smaran @siva @VenuMadhav
SEBI circular says intraday margin monitoring to be effective from April 2025. See section 5.3.3. why are you implementing it earlier ??
@Ankit_Jain3
Can you provide a screenshot or details of the trade taken on 31-12-2024?
So we can all be sure whose fault it is.
Hi @Ankit_Jain3
The SEBI circular that you shared here addresses Open Interest limits at a broker level and is not related to individual client margin management.
This is the relevant exchange circular that addresses the margin shortfall penalty due to an increase in margin due to hedge breaks and the expiration of one or more legs of the hedge.
sometimes margin requirement message comesâŚwhen there is excessive loss intraday in live situationâŚis this scenario also applicable for margin penalty @Jyoti_P_Deshpande @Meher_Smaran @siva @VenuMadhav
Yes, but not considered under upfront margin collections or wonât comes under peak penalty, so one will have time to bring the shortfall or can cut down the position to that extent.
in this case if shortfall margin not done till end of the day ( squaring off positions at the end of day only) how much penalty is applicable?
If you missed and RMS also dinât close then the penalty will be same as peak penalty, can check here for exact numbers.
Thanks for your post explaining how change in hedged positions due to expiry of legs can lead to margin shortfall and penalty which can be passed on to the client. I presume that this refers to current week legs which are open at close of the market on expiry day and which get auto closed by exchange.
I wish your guidance on following situation that I face many times. Suppose I have both long and short positions open in current expiry on expiry day (Which expired as OTM worthless positions) and also some open short positions in next week expiry. All open positions (Both short and long) of current week were SIMULTANIOUSLY auto closed by the exchange, leaving only next week open short positions. In such a scenario, whether effect of auto closure of BOTH short and long legs will be considered or effect of closure of only long positions would be considered to determine whether there was shortfall of margin requirement for open next week short positions?
If you consider closing of only long positions then naturally there would be margin shortfall for next week open positions, but if you also consider closure of short positions then that would release lots of margin leaving and overall effect of closing ALL current week open positions would be to leave enough available margin to take care of open short positions of next week.
According to my understanding, hedge break and margin shortfall occurs only if I close long position BEFORE closing some short position, but here since both long and short positions are closed simultaneously, this should not be considered as hedge break resulting in margin shortfall.
Also, if there was no margin shortfall for overall open positions at close of market (Since short positions of next week were allowed and taken based on margin released by squaring off some short positions of current week) â Then can closure of ALL current week positions lead to shortfall of margin requirement for open short positions of next week?
Since I face this scenario on most expiry days, your guidance and clarification on above points will be very helpful
Arvind Pendse
The EOD margin is charged only on the EOD open positions as per the margin requirement criteria set for such positions. The margin blocked for short open positions expiring in the current week is released only by EOD. This released margin is then considered towards the shortfall of open positions, which may have been caused by the expiry of the long side options and the removal of hedge benefits.
The margin released from expired short positions is accounted for when reporting the margins of open positions.
Closing the short side always releases margins, but if the margin increases for open positions due to the expiring long-side options exceeding the margin released from the short side, it will lead to a shortfall. This will be considered a loss of margin benefit, also known as a hedge break.
In todayâs case, if a calendar spread margin benefit is received for the trade, it is removed at the start of market hours on the expiry day of the hedged contracts. The margin blocked on the front end for the short options will reflect the post-margin benefit margin requirement.
This is in line with SEBI regulations effective February 1, 2025, where the calendar spread margin benefit is not available on the expiry day. Read more here:
Thanks a ton @sanjukumar.K sir for your clarification that closure of BOTH long and short positions would be considered for evaluating effect of auto closure of all current week open positions on margin availability for next week short open positions.
In that case, IF number of short trades closed/expired are more in number than number of long trades closed/expired and ALSO IF long trades were further away from ATM and short trades were nearer to ATM, THEN margin released by closing of short trades would be higher than margin consumed by closure of long trades? If yes then free margin available after auto close will be HIGHER than free margin available before auto close? At the minimum, auto close operation will at least not lead to margin shortfall for remaining open positions of next week IF already there was no margin shortfall before auto closure? In fact, since more overall margin gets released during auto closure, it will wipe out any margin shortfall (In part of fully) if at all any margin shortfall existed before the auto close operation? Is the above reasoning logical and correct?
Another doubt I have is that IF in a hypothetical situation where expiring longs were more than expiring shorts (and may be for some other reason which I cannot imagine or understand) the overall auto closure does result in margin shortfall â And if this shortfall is more than available margin before auto closure THEN there will be an overall margin shortfall for remaining open trades of next week. Meaning that margin utilized by next week short trades on standalone basis would be more than margin available. This margin utilized figure should be more or less same in BOTH margin statement and ledger statement?
It would be a great help if you can comment on my understanding of above situations and point out any fallacy in above thinking. I use above logic in taking trades on expiry days and if above thinking is not correct then I may land up in trouble of margin penalty in future trades. Hence keen to understand.
Thanks a lot once again for your quick and clear clarification.
@appendse
I donât think the number of trades closed decides the margin release amount; instead, it is in conjunction with the risk that increases due the hedge trade closed/expired. In general understanding, you could say that the margin release from the short trade closure exceeds the margin increase caused by the long option expiry, but it depends on the risk the portfolio was exposed to pre-expiry and post-expiry of the long-side trades.
As I said, any margin released upon the expiry of the short side is adjusted against the margin shortfall.
Correct.