CEO, 5paisa, argued that the decision to settle the contracts at a negative Rs 2,884 looks unfair on two counts. “First, Indian markets were not open, normally they are open till 11:30 pm. Hence, there was no option for a customer or even broker to square off their position and limit their losses. Second, unlike NYMEX, Indian markets are not equipped to trade at sub-zero prices. Both these are unfair to traders and brokers. Third, crude oil trades were carried out with around 55 percent margin and losses are more than 300 percent.”
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@nithin So is Zerodha going to reduce leverages on crude oil for a longer period of time? Because it seems to be the Nymex prices would be fluctuating even more if Corona fear ends, as every big producer wants to empty their stored barrels as quickly and start producing even more and more, while at the same time they want good price/barrel?
@nithin
If the client defaults in zerodha commodities pvt ltd . ;;; but he has ample balance in zerodha broking ltd ;;; will u block his fund from the zerodha broking as guarantee secutity and not do the payout ???
And if yes ; can u legally do so as per sebi or nse norms ??
what could the trader retailer can do in this case for getting his clear balance payout ?
@nithin - 1]Do your systems supports negative pricing at any point of time? If the answer is “No” then how the settlement price is justifiable below zero? * If your systems does not support negative pricing then Exchange shouldn’t have right to settle it @ negative price on any grounds.
2] Do Zerodha also plead/fight in the court on this issue with other brokers?
3] What retailers should do if they trapped in this situation? They should clear debit balance or wait till the judgement comes out?
Can someone explain what will happen to the option buyers and sellers of crude for the specific incident?
Not possible.
How does it work after a broker defaults? Exchange shares the members’ (broker’s) burden through IEPF? And client looses some, parked in the broker’s account?
Many days ur terminal does not work ?? Which is leading losses to the clients … please include spread orders in index options it will save many people from going bust . I mean we want spread orders with sl so tht we trade sytematically … hope u answer to this…
The counter argument to this is, all traders knew that Crude April will be settled at Nymex closing, so they should have closed their positions before 5 pm knowing that they will carry the risk of markets moving when we are closed. Like I said earlier, we are affected quite a bit with this, but tough to reason out what is right and what is wrong.
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Our exchanges can’t handle negative prices. So no, not possible as of now.
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The person who short will get payouts today (22nd as they had postponed the settlement by 1 day) which can be withdrawn to the bank accounts No way to escrow that. If anything has to happen, it has to happen today before clients request payout.
We don’t offer any additional leverage. The current margin of 70% is what is required to trade the contract. Yes, we are planning to increase the margin required and make it higher than 70%, until the volatility subsides.
We have to do whatever we can within what law allows us to, to recover the funds if clients default.
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- Exchanges can’t support negative price in India.
- Yes, we are.
- Debit balance to be cleared and if anything comes through from the court, it will get credited back to you.
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In crude oil contracts, all options devolve into future contracts few days before expiry. So there would have been no open option contracts on the expiry day. Check this
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If the broker defaults, the settlement guarantee fund (SGF) comes into play to ensure the other party of the trade is covered. Broker’s other customers can claim from the IEPF if broker defaults.
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In the last 2 months, activity in the markets have been exponentially higher. Almost every broker around the world has had issues due to this, some of the biggest (Charles Schwab, Robinhood, etc) being down for many hours during the day. We have had 2 small incidents where around 10 to 15% of our customers couldn’t login for around 15 mins after market opening, those logged in had no issues. There was 1 big incident where the last 15 mins of the trading day, orders weren’t going through. We have found issues which have caused this and fixed them.
Spread orders on Kite is something we are working on. It will be available soon.
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Same day, otherwise brokers will start charging an interest on the debit/negative amount .