Important trading update: Margin & Trading Exposures

 

This is an important update about the changes in the margin and trading exposure applicable from 1st September 2020.

In addition to margin and related penalties applicable in the Derivative segments, margin and related penalties shall also be applicable in the Equity segment.

 

For more information, you can read the related exchange circulars:

1. SEBI Circular CIR/HO/MIRSD/DOP/CIR/P/2019/139 dated 19th November 2019, 

2. SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2020/61 dated 16th April 2020,

3. SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2020/101 dated 19th June 2020 and

4. SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2020/146 dated 31st July 2020.

 

The changes brought out by the above circulars have been summarized below for your convenience:

1. Upfront margin is required to be deposited with the broker before entering into any new trade or taking any new position.

2. MTM requirements are required to be fulfilled by T+1 day in case of the Derivatives segment and by T+2 day in case of the Equity segment.

 

In view of the above, from 1st September 2020 onwards no trading exposure shall be allowed on the following unsettled values since the same cannot be considered towards upfront margin.

1. Intraday Profits

2. MTM arising from C/F to B/F futures position.

3. Net Options premiums sold (except against Options Buy)

4. No BTST Trades 

 

Amidst the above restrictions, clients shall however be able to use the sell credit of the Demat holding stock sold towards any new position from T day itself.

The MTM losses can be deposited by you on up to T+1 day for Derivatives or T+2 day for Equity, within the timings as specified by Upstox from time to time. Shortfall, if any, shall be liable to penalties at the rates so prescribed by the exchange from time to time.

The changes are explained below in detail -

 

1. Intraday Profits (all products):

Profits from Intraday trade will only be available after settlement from exchange.

For example - Suppose you bought 100 Shares of X Ltd. for Rs. 1,00,000 on 01/09/2020 and sold the same for Rs. 1,12,000 on the same day leading to intraday profit of Rs. 12,000. In this case if you wish to buy any new shares, you shall be able to purchase the new shares only to the tune of Rs. 1,00,000. (This is because the intraday profits earned to the tune of Rs. 12,000 falls under unsettled funds)

The above example shall also be valid for intraday profits earned in the derivative segment.

 

2. MTM arising from C/F to B/F Futures Position

For trades related to C/F to B/F Futures, profits made by selling the position will be available after settlement by exchange.

For example - Suppose you had bought a Futures contract on 01/09/2020 for a margin of Rs. 1,00,000. On 03/09/2020 the MTM profit is Rs 10,000 post square off. You would not be able to use this MTM profit of Rs. 10,000 on 03/09/2020 to purchase any new position and margin of Rs 1,00,000 will be available for any fresh positions.

 

3. Net Options Premium Sold

a. When you sell any carry-forward Options, you will be able to utilize the entire amount to purchase a new Options contract. However, this amount can be used to trade for any other segment like equity or currency or commodities only after settlement by exchange.

For example - Suppose on 01/09/2020 you have a carry-forward Options position with you worth Rs. 1,00,000 and you sold the same for Rs. 1,05,000. Now if you wish to purchase any new positions requiring margins, you would not be able to place any orders. However if you wish to purchase any new options contract you may do so to the tune of Rs. 1,05,000.

b. Conversion of C/F Options will be restricted/not allowed.
Suppose on 01/09/2020 you have a carry-forward short options position with you. Earlier you could have converted the same into an Intraday product and the margin would’ve gotten reduced, since Intraday is a leveraged product. However with the new mechanism in place, you will not be able to convert your C/F Options positions across products. You can do so by closing the C/F Option position and re-enter with a fresh intraday product position. The intraday margins will then be applicable which will be lesser as per intraday leverages as compared to your C/F margins.

 

4. BTST Trades

No BTST trades will be allowed from 1st of September, 2020.

Suppose on 01/09/2020 you have bought 100 Shares of X Ltd for Rs. 1,00,000. You would be able to sell such shares only post settlement of the same from exchanges. The settlement in the equity segment being on T+2 days and therefore such stock would be available to sell from 04/09/2020.

 

In case of insufficient margins, you shall be liable to penalties at the rates so prescribed by the exchange from time to time.

 

Squaring-off of your open positions shall continue as per our RMS policy on a best effort basis.

 

If you have any queries, please feel free to ‘Raise a Ticket’ from the Web Portal or our Mobile App.  Our team will be glad to assist you.