To trade in MCX why do we only need SPAN margin, where as for Equity F&O we need SPAN & EXPOSURE margin?


Bullseye bro! - Not sure why this is but my guess would be that its because of the difference in the view / policy of SEBI & FMC on RISK Management & settlement.

Sebi is empowering / protecting the brokers where as FMC is encouraging participation and favoring the retail traders. But the only direct comparison that can be made is in currency trading where the margin in MCX-SX is usually low specially for USD/INR. However is it reflecting in turnover? - I doubt it.

Moreover looking at the past data of broker/sub brokers who have shut shop due to losses occured, we need to say that SEBI has got it right :slight_smile:

The whole basis of SPAN is to analyze the maximum risk on a portfolio at any given point. We can safely assume that the guys sitting at both regulators (SEBI/FMC) and exchanges are qualified to understand the inherent risks in trading these stocks and/or commodities.

  1. Stocks are usually traded only locally with not too many global cues so it’s highly possible that someone with huge amounts of funds can run the price of a stock/future very high or very low. In fact, a lot of stock market legends/myths surround FII cash inflows and outflows which shake up the market. This is highly risky and it’s safer for the regulator to add an additional component to the SPAN margin. Exposure margin is charged over and above the SPAN margin at the prerogative of the broker. SPAN is mandatory, you have to pay that without which you and your broker will be fined. Exposure margin is to add an extra layer of safety for the broker in the event that something big happens.

  2. Commodities are traded all over the world and quite often the prices of essential commodities are similar across the globe barring the fluctuation in exchange rates and internal policies of a country. This means that no individual or group can corner the market in any essential commodity, thereby lowering the risk associated in holding a commodity position. Since the risk is lower, the exchange doesn’t find it necessary to recommend an Exposure margin for commodities. Having said this, a broker can choose to charge additional margin at his will. Nobody can stop him from doing it, although he will lose his customers if he collects more margins than necessary.


The levy of SPAN margin by Equity and Commodity Exchanges is to cover your risk on 99% of the days for the position held by you. The Exchange mandates that every broker shall levy on his clients the SPAN margin as applicable.

Exposure/Additional Margin is the levy of margin by the broker to safeguard his interest on the 1% of the days where the levy of SPAN is not sufficient. It is the broker's prerogative to charge Exposure/Additional margin.

There is no rule as such that says that trading in Commodities does not require Additional margin. The Commodity Exchange if it may seem necessary can levy additional margin.

You can find the various margin levied by MCX, one of the Commodity Exchanges in India here.


Standard Portfolio Analysis Of Risk (SPAN), this gives the cash margin required for particular derivative contract to buy or sell. It is determined by the exchanges. This calculated to minimize the risk.

SPAN is determined by exchanges and Exposure margin is determined by the brokers in Equity derivatives.

Coming to commodity derivatives there is only SPAN requirement no exposure requirement, this is given to broker choice to collect exposure margin. Generally brokers don’t collect exposure margin to attract more traders in commodity.

NSE has an interesting note on understanding margins. 

NSE has a set rule to calculate SPAN and Exposure margin. SPAN margin is calculated using a software called SPAN (Standard portfolio analysis of risk) developed by Chicago mercantile exchange. Exposure margin as suggested in the note above is 3% for index F&O and 5% for stock F&O on the notional value. So this is not something that a broker can charge arbitrarily. 

MCX charges only SPAN, and in times of extreme volatility they will have an additional margin over and above the SPAN margin. 

The question on why NSE suggests brokers to block an exposure along with SPAN whereas MCX asks only for SPAN is based on how comfortable the risk management teams of NSE and MCX are with the volatility of the underlying contracts. 


Commodities are more volatile than in EQ even though these are traded globally, You know few events, when any product in MCX hits a circuit the amount of loss made by client & broker may not recover the losses from client.

Hanan, commodities have proven to be far more volatile than stocks at least on MCX . And when you say a broker can charge additional margin at will - is that actually possible without a regulation. Cause SEBI has capped exposure margin @ 5% which was 10% before. Likewise if broker charge at will - clients could complain to FMC.
Also then why is there a difference in currency margins on both the exchanges?

Commodities are volatile, yes. But nothing as volatile as some stocks. On one day… just one day, I saw Satyam fall from Rs 200 to Rs. 6. I just sat and watched it. Nothing like this will ever happen on commodities. It’ll destroy the world.
There is no regulation to control charging higher margins - only competition controls it.

thanks nithin