Why are BOD margins considered on trading platforms instead of latest SPAN margins?

[nithin]

@deepak2508

assuming trader takes a position on T day and there is no shortfall on EoD T day but there is margin shortfall on T+1 day BoD

then can u pls share
a) what is the penalty charges
b) penalty is paid by whom ( trader or broker)
c) till what time next day (T+1 day) BoD can the trader bring additional margin to avoid penalty ( remember there was no margin shortfall on T day eoD)
c) if at 9.17am trader closes his position to become margin positive then also would he be charged penalty

many thanks

Check this

Margins & Margin penalties when trading with leverage

[deepak2508]

read the articel, thanks

but can u specficaly answer a, b, c and d queries

[nithin]

@deepak2508

but can u specficaly answer a, b, c and d queries

It is answered in the article, right?

Penalty charges

The clearing corporation (CC) takes five random snapshots of all intraday positions and margins across customers during the day to determine whether a sufficient margin is available during those snapshots. If sufficient margins aren’t available either at the end of the trading day or in the intraday snapshots, a margin penalty is charged on the net shortfall amount. The penalty is 0.5% of the shortfall amount lower than Rs 1L, and 1% for higher than Rs 1L. This can go up to 5% in the case of shortfall for more than three instances in a month. These penalties are collected by exchanges and deposited in the core Settlement Guarantee Fund (core SGF).

Paid by whom?

A broker should bear the penalty if they allow a customer to trade without sufficient upfront margins. It should be on the customer if the customer doesn’t bring in additional margin requirements after taking a trade. In the same spirit, regulations state that an upfront margin penalty can’t be passed on to the customer by the broker, and that non-upfront can be passed.

By what time next day MTM losses or margin increase have to be brought in?

Before market opening. After the market opening, CC takes snapshots at random time intervals. So not possible to figure out what time. It could be after 9.17 am or between 9.15 am to 9.17 am.

[jaygopal]

Here, cash means cash or cash equivalent collateral ( liquid funds, SGBs, selected bonds, etc.), right?

[Meher_Smaran]

Yes. Cash implies both cash and cash equivalent collateral.

[Chandra_Reddy1]

I still see margin getting updated during trading hours for positions existing already. If span files are not updated during the day, how is the margin required changing?

[nithin]

@Chandra_Reddy1

I still see margin getting updated during trading hours for positions existing already. If span files are not updated during the day, how is the margin required changing?

Margins also change based on if positions are in profit/loss. So even if a new SPAN file isn’t updated and if you are holding positions, the margins can go up and down based on the market movement.

Check this

There is a change in F&O Margin Policy again? Can somebody explain how this will affect us?

SPAN margins are charged to cover for the worst possible movement in the contract you are trading for a single day. The exchange has now revised this to cover for possible volatility over 2 days. SPAN margins are charged by calculating the Price Scan Range of the index or the stock. Price Scan Range(PSR) is the worst possible movement in a scrip in a day. PSR is calculated using the daily volatility of the scrip. It is 3 sigma of the daily volatility for index contracts and 3.5 sigma for stocks…

[deepak2508]

thanks for the reply
kindly share what are non upfront margin penalty scenario for option writing (not futures) …

[Chandra_Reddy1]

Thanks for the response. I sell far OTM NIFTY CALL and PUT options. I didn’t get how margin changes by underlying NIFTY index movement without updating SPAN file during trading hours

[nithin]

@Chandra_Reddy1

Thanks for the response. I sell far OTM NIFTY CALL and PUT options. I didn’t get how margin changes by underlying NIFTY index movement without updating SPAN file during trading hours

The price of the scrip is used for margin calculation, not just the SPAN files published by the exchange. So if the price changes, so does the margin.

[nithin]

@deepak2508

thanks for the reply
kindly share what are non upfront margin penalty scenario for option writing (not futures) …

When the position goes against the option writing position, the margin goes up, which needs to be brought in the next day before the market opening. If it isn’t, then a non-upfront margin penalty can be applied.

[Chirpreet]

Can you please clarify in one line by what time on T+1 day can I square off my position or bring in additional margin to avoid Margin penalty ?

Please do not paste link to any article as the answer to the above question is not given anywhere.

Please genuinely help your customers by giving clear and transparent answers.

[Ragavendran_M]

You can bring additional margin before the trading session starts (9.15 AM) on T+1 day. If you can’t able to add funds kindly square off the position once the market opens by 9.15 itself.

[Himadri_Goswami]

I have a query on margin utilisation. I have 100% pledged margin and I trade intraday using MIS. I understand for overnight position, I need 50% cash! But, what about, I want to do intraday trading only by using NRML order? I meant, the order is NRML (as MIS restrictions on some contracts), but I will square off by 3PM. Can I use 100% pledged margin in this situation or need to have cash 50%???

Thanks

[Arjun_Oberoi]

@Himadri_Goswami

Can I use 100% pledged margin in this situation or need to have cash 50%???

Yes, you can utilise 100% of collateral margins in such case (intraday trading).

Any MTM loss needs to be taken care of by cash (not collateral margins).

[ShubhS9]

@Himadri_Goswami

I have a query on margin utilisation. I have 100% pledged margin and I trade intraday using MIS. I understand for overnight position, I need 50% cash! But, what about, I want to do intraday trading only by using NRML order? I meant, the order is NRML (as MIS restrictions on some contracts), but I will square off by 3PM. Can I use 100% pledged margin in this situation or need to have cash 50%???

Yes, you can use 100% collateral margin for intraday trades even if you use NRML product type.

[meetarpit]

How will you know when the random snapshot will be taken and if you know then it will not be called random snapshot

[RaviMukunthan]

I asked a theoretical question on squaring off positions in case of any inadvertent peak margin shortfall occurs before the random snapshot gets taken. No one knows when the random snapshot will get taken, but if any inadvertent peak margin shortfall (that may occur owing to closing one leg of a hedged position etc…) is closed before the snapshot gets taken then the exchange won’t know about the peak margin shortfall and hence can’t impose any penalty.

[RaviMukunthan]

@MohammedFaisal, @Ragavendran_M

I have a question that arises on account of the margin penalty changes from 02.05.2023.

The interpretation of the changes is that BOD and EOD margin requirements will be the same for any given day and any shortfall in margin on the BOD next day can be funded before the market opens.

Let us say that today is the weekly or monthly expiry day. I have taken Rs. 50 lakhs worth of index options positions that expire today using stock margins only (without any cash margin) and I let them expire at 3.30 pm without squaring them off myself. There is no peak margin shortfall or MTM loss and the BOD margin requirement is Rs. 50 lakhs. As it is stated that BOD and EOD margin requirements will be the sane for any given day, what will be the EOD margin requirement in this specific case? Will it be Rs. 50 lakhs even when all the positions had expired automatically at 3.30 pm? Or will the EOD margin requirement become Rs. 0.00 at 3.30 pm or whenever the EOD margin file is run? When will the EOD margin file be run that will indicate the BOD margin requirements for the next day?

[Ragavendran_M]

As all the positions are expired, there won’t be any EOD margin requirement. Till the end of the day margin will be blocked in the terminal as you didn’t close the position. The next day morning there won’t be any margin block in the terminal.