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Physical Settlement update on F&O positions

All open position(s) in the F&O segment with a 24-06-2021 expiry date (except those who have opted for physical settlement) should be squared off  before 12:00 PM on 24th June 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 24th June 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 24th June 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 24th June 2021.

Feel free to refer to the exchange’ circular  here.


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