When we sell shares - is there any peak margin?

Trading
1

When we sell shares from holding - should it show any peak margin ?

2

Hey, @curiousvi

Yes, the peak margin is charged for all types of trades (both buy and sell), regardless of whether you are selling from holdings or not. When you sell from holding, the broker debits the shares and performs an early pay-in to the Exchange Clearing Corporation (CC). After the early pay-in, the margin charged for the sell trade drops to zero.

1 Like
3

Thanks so is there any % fixed on how much margin will be charged for selling in free and clear demat holdings? please share the % and I believe that fixed % will be shown as peak margin ?
If I understand correctly the peak margin will show only until early pay-in is settled in an hour or so during the same trading day correct?

Also after early pay-in a seller should get either 80% or 100% credit for more purchase on the same day within an hour correct?

4

The exchange charges VAR + ELM margin, as applicable to the stock, or a minimum of 20% as margin for all trades. The peak margin charged for all the EQ trades is fixed at 20%.

Yes, the peak margin is charged only until the early pay-in is completed. Once the stock early pay-in is successfully processed, the margin for such sale trade is dropped as the share give delivery is fulfilled.

As per the recent NSE circular, 100% of the selling credit from holdings can be allowed for further trades. At Zerodha, we provide 100% of sell credit for other trades.

1 Like
5

Thanks for clarification …
Suppose I want to sell 2 scrips worth 5 lac that is free and clear in demat and I don’t have any funds in my account neither I have collateral margin - in this case I can not sell because I don’t have 20% margin required ?

I asked about selling credit because I sold worth 8 lac of shares today at 9.20 am and I could not even buy one share of HAL …it showed insufficient balance - and broker claims that we are doing early pay-in (they even charge DP charges for every sell order separately for same scrip if its placed an hour apart) - do you think this is violation of laws/rules?

6

It is unusual to ask a client to bring cash to sell free holdings. You don’t need to bring cash for selling holdings because, when you sell shares, the broker is expected to do an early pay-in to avoid margin being charged on such sale trades. However, until the early pay-in is completed, the broker’s funds—equivalent to 20% or the applicable VAR + ELM—are blocked. Therefore, the broker must have sufficient funds available to meet such requirements.

It is not mandated by the regulator to provide credit against the sale of free holdings after early pay-in on the same day. When a broker allows credit for further use, the utilized credit margin is blocked from the broker’s funds until the sale credit is realized in cash.

If a broker does not allow credit for use on the same day, it may be because they do not have sufficient surplus funds of their own to extend the credit.

DP charges depend on the broker. Some charge separately for each sale leg of the same scrip, while others charge only once per stock on a given day, as there is a cost involved in passing the debit instruction to the depository. I don’t see any violation in this.

7

Ok now I see that it is not mandatory for broker to provide credit against the sale proceeds

So when I asked them about separate DP charges for the same scrip same day they said –

  • For every sale obligation, an early pay-in instruction is processed in accordance with the respective sale order.

  • Consequently, based on the number of Debit transactions, DP charges are debited from your Demat account and adjusted in your trading account as per our tariff.

So my question is - you want to charge for each early pay-in but you dont want to extend the benefit of it (means you dont want to provide credit from selling) that does not justify the early pay-in dp charges (I was charged 4 times for one scrip in one day-because I might have placed 4 separate orders because I was in impression that it will be charged only once at the end of the day) - now you think it is a violation? @Sanjukumar.K

8

The DP charge has nothing to do with allowing credit for other trades. However, the broker must inform clients about charging DP charges multiple times for separate sell trades of the same scrip on the trade date.

If you want to use the sale credit on the same day, maybe it’s time to consider changing your broker.