Unreasonable penalties being charged

F&O
63

Wow. Frankly, I logged in after a month, for a 5 min break, from a tough problem I am onto, but got simply drawn towards the high emotions flowing in this thread.

@Avi_Garg - Sorry for your loss & those penalties mate. I see you defending your view quite passionately and vehemently. But unfortunately your logic is flawed. I thought @Anil30 did an excellent job by giving that hypothetical scenario and making it extremely simple to understand this complicated situation -

But you conveniently chose to ignore it. So I am going to give an even more crude analogy to help you understand. This is exactly what you are doing -

Scenario - You bought a new bike (your money in zerodha account) and went straight into a one way street (stock market) from the wrong side. The traffic hawaldar (SEBI) stops you.
Traffic Hawaldar - This is one way street. Here is your ticket. (Rs. 22000 Penalty)

Avi - No No No. This is my bike. (your money). I have got it from my hard earned money. I can turn it where ever I want. (exceeding your span+exposure)
Traffic Hawaldar - But this is a one way street sir. (new rules in effect)

Avi - No No No. This was a two way street before. How come it became a one-way street. I was never notified. (earlier there was no penalty)
Traffic Hawaldar - There is a huge sign (zerodha circular that you missed) right at the beginning of the street from where you entered informing it is a one-way street.

Avi - Why you have to make a two way street a one way street (unable to accept change in rules). You know how much pain it causes to common people (retail investors)?
Traffic Hawaldar - Sir, we did this for your own safety to avoid traffic congestions and accidents. (excessive speculations, operators play, stock manipulation)

Avi - But how it is in my interest if I have to pay the ticket (penalty) for it?
Traffic Hawaldar - Sir, it is to safeguard common people from people like you. (since you are part of excessive speculative activity when you go beyond the money you have in account)

Hope it hits home.

Though it happens. I have made many such mistakes. Guess you are relatively new …

Anyhow, I see a lot of people advising you to go for change.org. My sincere advice - Don’t. You won’t get the numbers. And this is like - karle karle karle karle … On a lighter note … for reference - https://youtu.be/I6ES6opeHYI?t=3m20s

Cheers … getting back to quants … :wink:

64

I can see your point, though I did get what Anil was trying to say. Anyway, I care about my money and because of the new rules my volume has come down. Now one reddening factor is the extended trading hours purposed by SEBI which would mean I can trade more in a day and make more money hopefully. What do you have to say about that? What’s gonna happen?

65

Great … Happy to help … :slight_smile:

You have to accept the new rules and change with it. The sooner the better. Check this book - “Who Moved My Cheese?”. Will change your perspective for there are bigger rewards/opportunities when things change for the better.

If you are getting my point, not today, but slowly it will dawn on you that - it doesn’t matter. The way I see it, trading is personal and that is why it cannot be taught. (1)Having capital and (2)knowing yourself is a better approach to making money than following stock market, opinions, rules, news, etc.

Now, contrary to what many people think here - You have capital. You told your story 7 days ago and the rule was applied on 2-Jul-2018 implying you accumulated those penalties within max. of 17 working days without a margin call square off. That means this loss was not more than 20% of your capital. A simple back calculation of a 0.5% penalty per day will show -

((22000*100)/0.5)/17 = Rs. 258823.52

That you held on to this loss/shortfall on a per day M2M basis of Rs. 2.5L on an average if not in one shot. So my guesstimate is you are certainly not playing with 1L and have enough capital to survive and mould yourself according to the changes.

On the 2nd note, I liked the fact that you want to optimise the idle money. Nothing wrong with it. If it works for you - it works for you. If taking leverage and managing risk works for you, its brilliant. You certainly have more opportunities with extended trading hours and leverage can work longer for you. So if you see it right … and change quickly … things will favour you.

Have a good one … :slight_smile:

1 Like
66

@Avi_Garg what is the exact entry in ledger showing this penalty. I just want to check in my ledger also. So far I didnt find could you please give exact entry text by masking numbers
Anu

67

Just had one today. This is how it looks -

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The interesting thing is it is debited one week down the line for shortfall a week ago. I am still trying to make sense out of it but the numbers are not adding up. Also, it seems MWPL greatly affects this. So even if you are cash positive @ 3:30 PM you maybe cash negative for overnight due to increase in MWPL in positions you are holding and hence additional exposure requirement.

I was actually trying to find a mechanism to assess this margin increase that may be charged next day and keep spare cash accordingly … but its really hard since MWPL takes effect after market hours. And numbers are not adding up …

Maybe someone from Zerodha … can throw light … @siva-reddy … The right question is - if @ 3:30 PM you are Free Cash positive and after MWPL you go negative - are you penalised for that night?

68

No, no penalty for that day, from next day that would be applicable.

69

This is really odd then. Even if this is a 1% penalty, you mean to say that I was in a shortfall of Rs. 701721. I am pretty sure that has never happened. When I am Done For Day @ 3:30 PM, I always have positive margin available. I thought MWPL could explain it but it certainly doesn’t seem to be the case. Is it possible that for a brief period of time the Zerodha system allowed me to take extra leverage only to settle it right in ledger later? Also, is there something special happening on expiry? Sorry but the numbers don’t add up …

I will anyway take this offline and raise a ticket with support. Thanks. :slight_smile:

70

But keep us posted!: :grinning:

71

Sure … Actually got a quick reply. Hats off to Sharmila from Zerodha Support. Here it is -

Thank you for writing to Zerodha.

On 27.07.2018 you had a balance of Rs. XXX credit balance. You shouldn’t consider the obligation credit of 26.07.2018 as the settlement for FNO is T+1. The span required is Rs.AAA + Exposure required is Rs.BBB = Total Margin required Rs.CCC - balance available Rs.XXX = Rs.118936.21 was the shortfall.

On the short fall you have been charged 5% =Rs.5946.81+18% GST = Rs.7016. Hope this gives you the information required.

Team Zerodha
Sharmila Gupta

Take Away -

  1. You shouldn’t consider the obligation credit of expiry day as the settlement for FNO is T+1. Which is interesting for you have to maintain the balance after the expiry day in light of the margin requirements on expiry day.
  2. Short fall penalty has been charged 5% - I did check on this and I had been penalised in the past. I checked the circular (https://www.nseindia.com/content/circulars/cmpt18739.pdf) again and i think I had at least 5 penalties of 100-1000 Rs. in the past qualifying me for 5% this time.
  3. GST (18%) is part of the equation that I had been missing all along. I wonder what will be the tax treatment for it but this sums it up.

So it does make sense and Ms. Sharmila certainly managed to answer with numbers finally adding up. Gonna have a good long sleep over the weekend now.

Hope this helps others figure out their penalised ledger better.

Cheers! :slight_smile:

4 Likes
72

Can you help me out by signing this petition?
https://chn.ge/2OwSYQY

Hi Avi,
Sharing your petition on this thread as well.

Hey everyone …please take some time out to sign this petition and share it with other traders you know and who don’t want sebi to impose draconian rules on retail traders

1 Like
73

Thanks for posting that calculation part. It will help others too.
So you were short of money by Rs.118936.21 and you didnt even know it ? It is better to stick to Intraday I suppose ?

74

Pleasure … :slight_smile:

Yup. That’s the right question. Bang on. So I will be glad to answer it.

It took me 3 more days to finally figure out the whole anomaly. The problem is at 3:30 PM I did not know that I was short Rs.118936.21. This anomaly arises due to the gap in LTP and Settlement Price for the day/expiry. Zerodha’s RMS (Risk Management System) is based MTM on LTP and hence it allowed me to take extra leverage but their Penalty System in Back Office is based on Settlement Price of the day/expiry based on VWAP of last half an hour. Plus any post market price settlement which seem to go till 5PM.

Let me give you an example to make it crystal clear -

Let’s say I have 3L in account. Infosys is at Rs. 1000. And I have shorted 1000CE of 100Rs. premium in 2 Lots utilising all of my margin (1Lot = 1.5Lakh in Margin). Infosys was at 1000 from 3:00 PM to 3:25 PM when it hypothetically gave results taking the stock 10% down at 900 by 3:30 PM. Now my account will be 2*600 (lotsize)*100 = 1.2L up which will be visible in my Free Cash available margin calculated by Zerodha’s RMS. With 1.2L extra in account I will leverage the extra cash and go short on 2 Lots of NIFTY. Zerodha system will allow and its 3:30. Next the day’s/expiry’s settlement system gets into action and rather than pricing INFY’s option on 900 it prices it somewhere close to 980. Remember its VWAP of last 1/2 an hour along with various post market settlements. So from Back Office point of view - I am only up by 2x600x20 = 24K instead of 1.2L.

Account Value = 3L + 24K = 3.24L
Margin Utilisation = 3L + 1.2L = 4.2L
Short Margin = 4.2L - 3.24L = 0.96L
Penalty = 0.05*0.96L = Rs. 4800

Nobody to blame here. Every system be it RMS or BO is doing its job correctly. Its the cumulative effect that is causing the anomaly and costing you. And I am certainly not going to blame Overnight orders for it … Its too much dear to me.

Hope this helps. Cheers!

75

lucid explanation!!! Thanks for taking the time out and writing that.
I used to carry over positions almost always. I guess I will have to do less of that.

76

Sure … :slight_smile: … The solution obviously lies around having VWAP price and calculating MTM yourself based on VWAP to have lesser penalty occurrences.

@nithin @siva-reddy - Do you guys get VWAP price in the data feed? NSE certainly has a dedicated field for it, but I am not sure if this is for the day or last 1/2 hour and how much of a help it can be?

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77

NSE gives “atp” which is for entire day. Next day fresh start. The last 1/2 Hr price will definitely be different from this. The closing price is =last 1/2 Hr cumulative price which we can see on our screens at 3:30+few seconds. I dont know if they use this exact number to do settlement.

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78

I believe this may not be solution to avoid penalties as VWAP of last 30 mins should not be much different to LTP,even if it is this will not add much to margin requirement.

VWAP is not broadcast-ed by NSE to broker, anyhow that VWAP shown on NSE site is of entire day, not of last 30 mins.

1 Like
79

You are right. There may not be much difference, but unfortunately this is binary. Either you are in a shortfall or you are not. There is no grey area. It doesn’t matter if it is even Rs. 1 shortfall - it counts in 1 strike with 0.5-1% penalty. And the real issue is after 5 such small strikes it is the 5% penalty that I really dread thereon … :cry:

Ack. That makes sense … Thanks … :slight_smile:

80

Experienced the same when we get the penalties on margin

81

@Avi_Garg sounds similar to a bank penalty