Announcements

The fourth phase of Peak Margins as prescribed by SEBI here will be effective from 1st September 2021. This means in order to offer Intraday trading across various products brokers need to collect a minimum of 100% of funds on the prescribed limit from 1st September 2021.

What are Peak Margins?
Before 1st December 2020, brokers could provide higher leverages by offering products like Intraday (MIS), Cover Order (CO), and Bracket Order (OCO) as margins would only be applicable in case a position is carried forward.

However, in the interest of the market and to bring in more stability, SEBI mandated all brokers to collect minimum funds from customers even for the Intraday positions. This means traders can take Intraday positions only after fulfilling this minimum margin requirement. SEBI also asked clearing members and clearing corporations to monitor brokers’ margin activities from 1st December 2020.

The changes as per these guidelines are being rolled out in phases.

In the previous phase which was effective from 1st June 2021, brokers had to collect a minimum of 75% funds on the prescribed limit from customers. And now in the next phase which will be effective from 1st September 2021, brokers have to collect a minimum of 100% funds on the prescribed limit from customers.

You can read more about it here.

How does this affect intraday traders?
As per SEBI guidelines, brokers have to collect a minimum of 100% funds on the prescribed limit on Intraday trading offered across various products. Margin applicable on the intraday positions would be:

• Equity: 100% on applicable VAR + ELM OR 20% of trade value 
• Futures and Option (writing): 100% on SPAN + Exposure margin

What are the revised margins as per this day?
Revised margins from 1st September 2021 are:

• Up to 5X margins on Intraday and CO Orders in Equity 
• Leverage NOT available for Intraday and CO Orders in F&O, Commodity & Currency (i.e. 1X margins)

Stay tuned for important updates from Upstox!

All open position(s) in the F&O segment with a 26-08-2021 expiry date (except those who have opted for physical settlement) should be squared off  before 12:00 PM on 26th August 2021 to avoid any further action by Upstox.

What does this mean?
In an F&O contract, when there is an open position that has not been squared off by its expiry date, physical settlement takes place. This implies the physical delivery of stocks to settle the open transactions instead of settling them with cash.

Here’s an example – A trader bought futures for XYZ (lot size – 5000) at Rs. 100, so the contract value is Rs. 5,00,000. On expiry day, if the settlement price for XYZ is Rs. 102 and the contract has been settled on a cash basis, the trader will get a profit of Rs. 10,000. If the contract has not been settled, physical settlement takes place, which means the trader will have to pay an amount of Rs. 5,10,000 (as per settlement price of Rs.102, lot size 5000) and 5000 shares will be delivered to his Demat account as per the T+2 days settlement cycle.

As per our latest announcement mentioned here, we require consent in order to physically settle your transactions.

However, for all users who have not submitted consent and who do not square-off their positions before 12:00 PM on 26th August 2021, then here’s what will happen:

A) Auto-square off by Upstox:

If users cannot square off your positions before the cut-off time (i.e., 12 PM on 26th August 2021), we will square them off at the prevailing market rates. Such square-off orders will be placed by our team as “Market Orders” and since order matching happens at the Exchange level, we shall not be liable for the rate at which they are executed.

B) Physical settlement by the Exchange:

If we cannot square off your positions due to market operational reasons, positions will be physically settled by the Exchange, and you will have to bear the costs (penalties & losses) arising from it. This means -

1. For a long open position (Long Futures, Long Call Options, Short Put Options)
   Your long open position will get converted into a ‘Buy Equity Delivery,’ and you will be liable to pay the entire settlement amount as the holder of the position.
2. For a short open position (Short Futures, Short Call Options, Long Put Options)
   Your short position will get converted into a ‘Sell Equity Delivery,’ and you as a holder of the position will be liable to deliver the shares; else, an auction process will be applicable.

To avoid this entire process, we recommend squaring off all open F&O trades before 12 PM on 26th August 2021.

Feel free to refer to the exchange’ circular  here.

As an Upstox Equity Intraday trader, you have been able to use your speculation profits on T+1 day to place trades. However, from 27th August 2021 you shall only be able to use these profits from T+2 days onwards.

What are speculation profits?
Speculation or profits refer to the day-to-day (Intraday) profits/losses on your positions. It keeps fluctuating based on your trading position and the prevailing market prices. 

Why will you not be able to use speculation profits on T+1 day?

When you sell/exit Intraday trades, the Exchange takes T+2 days to credit the profits to a broker and thereby to your account. Hence, any profits used by you on T+1 could  lead to a margin shortfall which is liable to penalties. To protect you from such penalties, we have decided to discontinue the use of such profits on T+1 day  in your best interest. 

Summarising, what this means for you:

• From 27th August 2021 onwards speculation profits can be used to place trades only from T+2 days and not on T+1 day 
• This is only applicable for Intraday Equity traders and not F&O traders

We apologise for any inconvenience caused and thank you for your patience. 

While that is for Equity Intraday, read more about profits on Equity Delivery orders here: https://help.upstox.com/support/solutions/articles/251537-what-is-the-settlement-cycle-when-i-sell-my-holdings- 

Following the recent SEBI / Exchange directive, we are discontinuing our Digital Gold product.

What does this mean?
While you can no longer buy Digital Gold on Upstox, you can still sell Digital Gold till 5th September 2021 on our platform. 

What if you want to hold on to your Digital Gold?

If you wish to hold on to your Digital Gold and sell it after 5th September 2021, you can do so from Augmont, our Digital Gold Partner. You can also buy more Digital Gold from them. Steps on how to buy and sell Digital Gold from Augmont would be shared with you shortly.

Be rest assured that Augmont is safe and secure. They have been our reliable Digital Gold Partner for years. However, in order to follow the regulatory directives we had no other option but to discontinue Digital Gold on our platform.

As per a SEBI mandate, physical settlement is compulsory if a trader holds a position in any Stock F&O contracts on expiry date.

What is physical settlement?
In a Stock F&O contract, when there is an open position that has not been squared off by its expiry date, physical settlement takes place. This implies they have to physically give/take delivery of Stocks to settle the open transactions instead of settling them with cash.

Examples of physical settlement:
Future

Long positions of 1 lot of Reliance, 250 quantity at Rs. 2000 i.e. Rs. 5 lakh contract value
F&O = 20% charges i.e. Rs. 1,00,000. This means, you are required to give Rs. 1 lakh, but if you decide to physically settle then you need to have a complete contract value of  Rs. 5 lakhs.

Short positions of 1 lot Reliance 250 quantity at Rs. 2000 i.e. Rs. 5 lakh contract value
F&O = 20% charges i.e. Rs. 1,00,000. This means, you are required to give Rs. 1 lakh, but if you decide to physically settle then you need to have the holdings of 250 quantity of Reliance and Rs. 1 lakh margin money till expiry date.

Option
Long - 1 lot of Reliance, 250 quantity for strike price of Rs. 2000 Call (CE) Options.
If the underlying price of Reliance is greater than the strike price of Rs. 2000, then the contract is said to be ITM (In-The-Money). If you wish to go for physical settlement, you need to maintain a free ledger balance of Rs 5 Lakh in your account, else physical settlement would not be done.

Long - 1 lot of Reliance, 250 quantity for Strike price of Rs. 2000 Put (PE) Options.

If the underlying price of Reliance is lesser than strike price of Rs. 2000, then the contract is said to be ITM (In-The-Money). If you wish to go for physical settlement, you need to provide the Stocks (shares) equal to the lot quantity positioned to be available in Demat account, else physical settlement would not be done

Please note -- 

• Short ITM PE options, treatment would be similar to Long ITM CE options.
  Free ledger balance equal to the contract value to be maintained.
• Short ITM CE options, treatment would be similar to Long ITM PE options.
  Holdings shares of lot quantity positioned to be available in Demat account.

What is the process for Physical Settlement on Upstox?
To opt for physical settlement on Upstox, you need to provide your consent first and here are the details for the same:

• To provide your consent for physical settlement of open Stock F&O contract(s) with August-2021 expiry visit the ‘Profile’ section on your Upstox account on our App / Web and give your consent from here before EOD on Tuesday, 24th August 2021.
• Based on your consent, Upstox will evaluate whether your position qualifies for physical settlements and if there is sufficient  ledger balances / holdings (whichever applicable) is available.
• Kindly, plan your trades keeping in mind that you will not be able to trade in fresh positions in the current August-2021 expiry F&O contracts from Wednesday, 25th August 2021 onwards. 
• Correspondingly, position conversion(s) on carry forward of any stock futures positions shall also not be permitted.

What other impact could this have on your positions?
Your position will automatically be squared off in case:

• You have not provided your consent for physical settlement
• You provided your consent for physical settlement and do not have Ledger Value (equal to contract value) / holdings available for the physical settlement of your positions.
• In a case of funds / holdings not being available for all the open positions, we will execute square offs for all the positions. Thus no partial funds / holdings evaluation for the expiring positions will be considered by our team.

What else to keep in mind?
Delivery margins would be applicable as per Exchange norms on all the existing long ITM (In The Money) stock option positions in a staggered manner as explained below:

• 10% of delivery margins computed on expiry -4 days EOD (Friday)
• 25% of delivery margins computed on expiry -3 days EOD (Monday)
• 45% of delivery margins computed on expiry -2 days EOD (Tuesday)*
• 70% of delivery margins computed on expiry -1 day EOD (Wednesday)*

• To avoid margin shortages, Upstox would be blocking such (above mentioned) delivery margins from Beginning of the Day (BOD) instead of End of the Day (EOD).
• If the positions are not squared off for any reason (e.g: non-liquidity), then the contract would have to be settled physically and you would be liable to pay the entire amount of the settlement.

* If you have opted for physical settlement, you would be required to fulfil the entire funds (contract value) / holdings requirement by EOD on Tuesday i.e. 24th August 2021.

In case of spread contracts, you are advised to provide margins for both the legs  since the risk of one leg square off by you anytime would result in physical settlement of the other leg.

Brokerage in Physical settlement:

Since there is a substantial increase in effort and risk to settle these F&O positions resulting in physical delivery, if F&O positions result in physical delivery brokerage will be 0.25% of the physical settled value. For all the netted off positions brokerage will be 0.1% of the physical settled value. All physical settled contracts (Futures & Options) will also carry an applicable Exchange charge.

And that’s all. Keep a watchful eye on this page for more updates from Upstox!