Sintex Futures which was trading at Rs.106 on 24th May opened at Rs.26 on May 25th, in this case both SPAN and exposure margin aren't enough to cover potential losses, who is liable for the losses in this case?

I wanted to know how the brokerage handles such losses in this kind of a case and where does the liability lie.

Amount is deducted from available free cash in your ac

Even if not enough, then order existing positions /holdings may be squared off to cover the loss (this depends on losses & account value)

Even after this if there are still money due from client, then the drama begins,!!! similar to recovering a bad loan / credit card bill, begins!

@nithin did I get it right?

But in this case, it looks like a Corp action is the reason for price drop, in which case its compensated in volume.

This is a case of corporate action. Check this circular. All contracts were forcibly expired on 24th May and new contracts started on May 25th. So there was no F&O loss for anyone.

But assuming such a big drop in price did happen, the loss is always on the trader. The broker will try to recover it from the client in whatever the legal means possible if client doesn’t make good of the loss.

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