Update 4th Aug 2020 - Margins for trading stocks & Intraday leverages

Trading
21

The Rs. 10 you can use the same day to trade Futures or Stocks, but profits you can only use the next day.

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22

I have a question…in IndusInd the var+elm margin is approx 50% of total value…so u will collect maximum 20% for taking intraday trade in IndusInd?
N if yes then is it to be continued even after August 2021 or is it until 1st September only?
Plz reply :pray:

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23

I think co/ho order will continue but with only 5x margin at maximum

24

As said above full span +exposure is needed for any trade from sep 2021, from dec 2020 leverages will start reducing till sep 2021.

You can buy liquidbees, stocks or some other gsecs,sgbs and pledge to get margin for 50%, remaining 50% should be in cash, liquid funds are as good as cash if pledged.

25

Yes.

Will be forever till any new rule changes it.

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26

@nithin @siva
regarding pledging - what all instruments can be used for pledging? is it only equity? or Mutual Funds, liquid funds, bonds also be used for pledging?

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27

This is such a relief…at par with U.S.A…even they don’t allow more than 4x in intraday

28

Everything which is allowed by clearing corporation, includes mf,gsecs few selected bonds etc, from next week we may start this.

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29

awesome! thanks a lot.

30

i have sold a nifty call for 50 …and buy back it again NEXT DAY at 30…will i be able to use 20*75 profit as it is positional profit and not intraday? @ShubhS9

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31

hello sir, like you mentioned client need to have minimum of VAR+ELM or 20% of trade value and i checked the sheet attached by you mentioning VAR+ELM of different stocks and mostly have more than 20% . so, does that mean we will get a uniform leverage i.e 5x for all the stocks??

thanks and regards

AJAY GUPTA ( proud zerodha user )

32

The same rule applies for positional trades as well, you can’t use realised profits on same day, you will have to wait for T+1 day.

33

Makes sense. But again, there wouldn’t be much sense for the regulator to start imposing penalties in a phased manner from December and yet expect full compliance from October 2020. That said, I believe there is a general lack of clarity on the subject at the moment.

On a broader point, the issue the regulator is trying to solve here (specific to leverages) is ‘insane’ leverages, which create disequilibrium - not fair for some brokers to be offering 20x or even 50x in violation of the spirit of span + exposure whilst others are being more responsible capping it at say 4x. However, removing intraday leverages altogether isn’t a smart idea as well. Logically, the risk of taking an overnight position is much more than intraday - so why should the margin requirement be the same? Perhaps a pragmatic solution for the entire industry might be for the intraday F&O leverage to be capped at say 4x. This will make it a level playing field for all brokers, manage risks effectively and also meet the intent of the proposed changes by SEBI.

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34

@nithin, @siva

Since the SEBI circular explicitly says we can collect part of SPAN + EXPOSURE in phased manner, then there won’t be question of broker being non-compliant. In other words, brokers are expected to be complaint in phased manner to collect full margins for intra-day.

35

Yeah, you are right. But I don’t know if brokers will allow trading in illiquid and volatile stocks with 20%, they might ask more than 20%.

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36

Yes, just that when spirit of circular says one need to collect margins upfront and reporting starts few may want to follow it and not break it, anyhow let’s wait, other brokers including us may allow leverages till sep 2021.

37

Let me give you an analogy, assume your city introduces a new rule saying from December, we will charge Rs 100 as penalty for jumping orange light at traffic signal, but until then there will be only warning. Is it okay to jump the orange signal, knowing that it is not right? :slight_smile: Yeah, it is a grey area, need to see how this plays out.

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38

Sir, don’t you think CDS should be given priority in terms of leverage because naturally the risk is capped in the currencies because of the limited trading range. Currently, we are getting adequate exposure on zerodha for trading currency derivatives. Would you like to comment on the same?

Thank you

Ajay gupta

39

@nithin,

Thanks for the reply. Really appreciate all the your efforts for retail traders, who don’t have formal representation.

Regarding intra-day leverages in FnO, I think we need to look at intent of SEBI. Yeah, for intra-day they want them to be just (SPAN+Exposure in FnO), but not in one shot, say Oct 1 or Dec 1, but rather in phased manner. It’s a slow kill / phased process :slight_smile: providing time for markets/market participants to adjust to new rules.

Returning to your analogy, think that there are exceptions/phased implementation of proposed traffic rules.
In the first month, you can jump orange light for say, 20 times, 2nd month 10 times, 3rd month 5 times, 4th month 0 times. In each month, penalty is levied, if no of violations is more than specified number.
This is in essence, SEBI circular.

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40

Any chances of the pledging charges increasing?

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