Requirement for 50:50 Cash & Collateral

F&O
44

@siva @ShubhS9 @nithin
Can you please have a look at the below question

Given the way the calculation of margin works in kite. Can you confirm if my understanding is correct.
Suppose If I have cash balance of 10L and pledged collateral (Non cash) of 15L, that bring total margin available at 25L and I take a position of 24L.

Out of the 24L, 50% would be reduced from collateral bringing that balance to 3L (15L-12L) and the cash balance will appear as -2L (10L - 12L) with Total margin available as 1L (25L - 24L).

Would this -ve cash balance (given its only intraday) lead to an interest charge of 0.05% per day or would the -ve balance not matter as far as the position is intraday.

Would the -ve cash balance impact my trades/orders (FnO and further MF purchase) or would the system be smart enough to allow me to place order and purchase order as the cash balance is only -ve during the day

45

Yes in Kite available cash will show -2 lakh.This is just for your indication that you are not maintain 50:50 ratio and you don’t have free cash to withdraw. But you can use remaining 1 lakh rupees to buy options or shares.
Interest will be charged only if you carry forward the position. So not to worry on that.

2 Likes
46

Thanks for the reply, would the 1 lakh also be available to buy MF on coin as well?

47

Yes, you can able to buy MF also.

1 Like
48

thanks

2 Likes
49

Hello Sir. Is this true that with “negative cash balance” but positive “margin available” on funds tab, we can create more short positions intraday?
In my case for eg I had 25L equity collateral, 5 L free cash then for intraday option writing how much can of this 30L can I use?
1.Shouldn’t 15L of 30L position come in cash leading to negative cash balance of -10L(have 5L free cash only) So will zerodha allow me to even create such a position or reject the order?
2. If allowed will I be charged interest penalty of 0.05% on not maintaining 50% cash? pls reply @Ragavendran_M @siva

50

For intraday one can use full collateral, it is okay to have negative cash but total margin should be positive for intraday.

51

Great so I can fully fund my intraday position only using collateral margin. But one technical doubt is at EOD if I have a negative MTM ie loss of say 1L how will the broker deduct funds since there will be 0 “free/available cash” and remaining 30L margin is purely from nom cash pledged collateral? How will this 1L obligation be met, will I have to bring funds to my account? @siva

1 Like
52

Anyhow you said for intraday right, losses you need to bring in if not penalty will be charged, so always recommended to maintain 5 to 10% in cash.

53

Yes for intraday only. Ok so there will be a mail from zerodha and every day MTM loss is not settled from free cash a penalty of 0.05% of the 1L loss due will be charged.

54

Right, so you should make sure to bring in that, so maintain some free cash.

55

This is he nightmare from brokers , in The circular SEBI clearly told that’s rule only applicable for only to th broker , not to the clients , brokers are trying to catch some money from clients , the actual fine is not triggered from NSE , simply those who fall 50% short of cash requirement - the penalty amount is not triggered from nse . brokeres grabbing the clients money , i will raise a complaint to sebi to stop this , then how icici , Motilal, 5 paisa subscription plan , fyers , samco these brokers don’t need to keep cash colleterial in those broker account , maybe SEBI put rules only to zerodha and upstox

@siva we also know rules ,

1 Like
56

Right, this is upto broker to decide, if there is no cash component from client then broker has to place his own funds, and why would broker want to park his funds for nothing?
Few traditional brokers does and collect the interest via high brokerage so it is recovered but for flat brokerage model it doesn’t make sense in the long run, currently few other brokers are doing it though to attract clients and are desperate.
For ex: imagine a user taking nifty fut, 10 lots, required is 10 lakhs, so 50% come from collateral and rest 5 lakhs broker funded, so to earn 20 rs per order broker has to park 5 lakhs of his own capital for one month, does it make any business sense in the long run? we want to build a sustainable business model in the long run at the same time helping clients to become better investors/traders.

4 Likes
57

@siva at least want to treat all the debt funds want to treat cash colleterial , if we can get 3 % more from liquid fund its good for us , even as a trader we cannot profit at all times some losses and brokerage we can compensate from these debt fund returns , as you really think to save clients you need to do that , what is the different between cash colleterial liquid fund and non cash colleterial in debt funds , its just to milk some money from us , thats true , even in USA does in have a rules

58

Of course liquidbess are treated as cash only, let me know if not. @Nakul

59

@siva I think he (@Riyas_Ahamed) is talking about the following debt fund categories -

  1. Corporate Bond Fund
  2. Short Duration Fund
  3. Low Duration Fund

They all come under short term debt fund categories, are fixed income and mostly safe. I have been thinking of asking this for a while now. Why are they part of Non-Cash component in Zerodha collateral list? Shouldn’t it be cash component? Indeed, they can fetch 5-6% more returns then liquid funds but sadly they are not part of cash component.

2 Likes
60

Yes i am pointed these fund to treat as cash component , its upto zerodha want to decide, but siva is replaying different answer

61

@Nakul

62

Cash Component or Non Cash Component is decided by the Clearing Corporation and not Zerodha.

1 Like
63

@Stonecold - Zerodha is a self-clearing member since March 2019 and hence Zerodha is the clearing corporation for all Zerodha trades.

From this.

Zero clearing charges at Zerodha

Since Zerodha has opted to be a self-clearing member, effective from March 2019, all trades placed at Zerodha is self cleared. Hence Zerodha does not levy any clearing charges to its customers.

So if that is the case is the collateral list Zerodha’s choice? I am pretty sure exchange is involved here somewhere. So just out of curiosity -

  1. Who decides the securities in collateral list?
  2. Who decides which securities will be part of cash component and which will be part of non-cash component?