Petition by Chirag Gupta for STT

General
1

Hi dear experts…!!
referring to the petition by Mr Chirag Gupta…


I want to clear some doubts…

  1. He has a huge loss or Rs 18 lacs…who will collect this loss form him??
  2. If he is not able to pay this loss then who will take action against him??
  3. What could be the legal action?? will he be imprisoned if he cannot pay losses??
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  1. The broker is responsible
  2. The broker can go to the court
  3. Imprisoned, hmm… maybe if the broker has powerful lawyers. But usually these things don’t go upto those levels. It is very similar to say defaulting on a bank loan.
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Okk…but bank loan is always mortgaged with an assets…so even when customer becomes defaulter at least Banks have rights to sell his assets to recover debts…but what about brokers…Do they have right to seize assets of the defaulter clients??
and what if at all Client is unable to pay the losses then what a broker can do at the most??

4

Not all bank loans have collateral. Most business loans don’t. Yeah, the broker can go to court to recover the dues in whatever way.

5

Hi Nitin,

How does Zerodha handling such issue…? It could always be a case, wherein we never find a trade to square off huge quantity at the last moment of expiry.

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Options sellers don’t want to square of their positions. Buyer can’t do anything.

The best thing is to trade next month options in the week of expiry and avoid keeping options till expiry.

The ultimate thing for retail traders is to avoid trading options.

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thanks for clearing my doubts…!!:slight_smile: Ultimately its a court whose decision is final…

8

Trading anything without sufficient knowledge is always dangerous…Chirag came to know impact of STT only after he suffered this disaster…Had he been aware of STT rules, he would never had done this gambling…!!

9

Is it possible for zerodha (or brokers in general) to square off ITM options by 3.25 pm as a risk managment ?

10

Very tough, these options tend to be very volatile at around that time. Imagine brokers squaring off and then markets moving in favor of the positions. Clients will make hue and cry.

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11

Until SEBI comes up with a solution, I think a written consent form could be used by a broker to square of ITM position. Not sure if this viable from Broker perspective…

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@nithin So did Chirag finally benefit from the NSE circular in Aug 2019 regarding reducing the STT limits Sept 2019 onwards. Referring to this post from you

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As those rules were introduced over 2 years later, they likely wouldn’t have gotten any benefit from them. I came across a tweet where they mentioned that they had to pay the STT. But their petition had an impact and a ‘Do not exercise’ option was introduced a few months later (Refer to this thread - NO MORE STT trap on exercised In the money options).

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