Open Interest Restrictions Understanding

@siva @ShubhS9
1.Why SEBI rule is not applicable to Custodian Partner?

  1. If you have an existing short position, you can hedge your trade by buying options without any range restriction. Lets say spot at 14540, Restriction between 14400-14750, i short 14600 and then i buy 15000 to hedge one after the other. Is this allowed?
    2.a) if the above is allowed then people with high margin can literally trade without any range because the above combination basket order is not possible right?
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That is the rule, OI is counted on custodian book but not the broker.


We want to help users at least hedge if they have shorts so can reduce margin for them and have hedge types, that’s the only alternative for now.


what’s the role of custodian? Any example will help or Link to study about custodians role.

Why cant Zerodha become custodians themselves instead of moving to orbit? @siva @ShubhS9

This page on the NSE website explains the role of custodians briefly -

Custodians are clearing members but not trading members. They settle trades on behalf of their clients that are executed through other trading members. A trading member may assign a particular trade to a custodian for settlement. The custodian is required to confirm whether he is going to settle that trade or not. If the custodian confirms the trade, NSE Clearing assigns the obligation to the custodian. If the custodian rejects the trade, the obligation is assigned back to the trading member.

Custodians Clearing members are required to request Clearing Corporation for allotment of Custodian Participant (CP) code for the clients for which they wish to clear and settle. The request has to be made along-with documentation for the said purpose like SEBI registration number, PAN number etc. depending on the category of the client.

For further reading, you can refer to SEBI (Custodian of Securities) Regulations 1996 and Deloitte’s report about Custody market in India. Also, there is an article, which touches upon how a custodian do their job (in the context of FPIs).

As the NSE website mentions that “Custodians are clearing members but not trading members”. This likely explains why Zerodha can’t become a custodian directly (as it is a Trading Member of NSE).


who is the clearing member w.r.t Zerodha(trading member) ? is it the orbis financial ?

We are self clearing for our clients, orbis is custodian.

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How is orbis facilitating zerodha?

The 15% OI limit is per clearing member. As the custodian (Orbis) is a separate clearing member, the OI of the customers using Orbis isn’t counted towards Zerodha’s OI usage (likely expanding Zerodha’s OI limit to 30%). This was mentioned in different thread as well -

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@Prayag , so orbis is only facilitating with regards to OI since zerodha is clearing and settling themselves.

@siva @ShubhS9

In understand that we need to sell first and then we can buy a OTM hedge.
But does the ratio need to be 1:1 or can I have a strategy where I want to sell 2 lots and hedge with 3 lots. Would that be allowed?

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This won’t be possible. You can buy options outside the allowed range only to the extent of quantity shorted.

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Is there a solution for this problem.

Sell BN Options QTY 500
order placed (limit) to buy OTM option (hedge) Qty 500, but the market moved and only 100 were traded.
Now the system is not allowing me to modify the price on the balance 400.

Even if I try to cancel the order and place a new order for the balance 400 qty (still unhedged) it is not allowing me and tell me OI restricted.

What can be done in this scenario?

It should allow, if you don’t have other longs in that underlying. I mean at least up to shorts one can buy longs.

Its not allowing me, would it be possible for you to have a look. Client code OZ2228

One should add all longs and all shorts on underlying, I can see you have more longs than shorts.

Yes, a few of my Shorts did get closed. Makes sense, sorry for the trouble.

Hi, @siva @Prayag
When you move your account to cutodian ,In zerodha article, it says

  • IMPS/NEFT/RTGS will not be available for adding funds. You can continue to add funds using UPI or net banking.

Don’t we add funds using netbanking in NEFT mode? whats the meaning of NEFT/RTGS not allowed but netbanking is allowed?

I think by netbanking, they mean the payment gateway method. Also check this page.

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Thank you @Prayag

Why is the regulatory limit of 15% open interest(OI) of total market wide OI in any F&O contract not applicable when option buying done for hedging? How does SEBI know whether the option buying is naked or for hedging purposes?

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