It is to be noted that the client has to maintain the required upfront margin in the equity segment similar to that of the derivatives segment with effect from the 1st of September 2020.

MAINTENANCE OF MARGINS IN CASH SEGMENT

KEY POINTS:

• A 20% upfront margin is to be maintained by the client in the trading account before dealing/ trading with any share or security.

Example 1:  If the client wants to buy SBIN shares of worth Rs.50,000 then he/she must have Rs. 10,000 in his/her trading account. Whereas for the rest of the money, it has to be paid within T+2 days.

Example 2: If the client wants to sell Rs.50,000 worth of SBIN shares from the holdings, even then he/she is required to have an Upfront margin of Rs.10,000 in the trading account, failing which penalties will be levied.

• Similar to the derivatives segment, the cash segment will also now have established, Margin Shortage Penalties.

• The Client who has sold-off holdings will not get any CFS (Credit For Sale) benefits on the same day. But the said benefits will be provided once the settlement has taken place i.e in T+2 working days.

Example:  A client had bought a number of SBIN stocks on Monday, if he wants to sell these shares, he can go ahead with the process only after receiving the shares in his Demat account. i.e in T+2 working days, he can sell the shares.

• For BTST trades, margins will be levied on each side of the trade; (i.e) For both Buy and Sell transactions. Sufficient margin is to be maintained for the Sell-side as well as the buy-side, failing which penalties will be levied.

ILLUSTRATIONS

Let’s Assume the Applicable VAR + ELM margin for SBIN is:
VaR          –   18.89 %
ELM         –   3.50 %
Total VaR –  22.39 %

Here, 20% will be the required upfront margin to complete the transaction instead of 22.39%. All transactions are required to have this upfront margin of 20% before the placement of the order.

Illustration: 1 – Margin Requirement
Margin Required = (Price x Qty x Total VaR) / 100
= (180 x 1 x 20) / 100
= Rs.36/-

Illustration: 2 – Order Execution
Client “A” has a Cash balance of Rs.200/- and is placing a Buy order in SBIN with 1 Qty at Rs.180. Hence, the margin requirement of the client A for the order to get completed is Rs.36/-

Cash Margin          = 200
Margin Used          = (180 x 1 x 22.39) / 100 = 36
Available Balance  = 164

Illustration: 3 – Order Rejection
Considering Client “A” has a Cash balance of Rs.200/- and is placing a Buy order in SBIN with 10 Qty at Rs.180, here the margin requirement is Rs.360/- This order will be rejected by the RMS due to insufficient margin funds.

Cash Margin          = 200
Margin Required   = (10 x 180 x 22.39 ) / 100 = 403.02
Shortfall Amount   = 200 – 360 = – 160

Illustration: 4 – Calculation of limit or leverage for a particular stock based on Var+ELM or the Required Margin

​​Leverage / Limit     = Available Limit / VaR + ELM (or) Required Margin

​​SBIN Stock Limit     = 200 /20 = 10 Times

Note:

SEBI has prescribed a penalty structure in case of a margin shortfall in the cash segment similar to that of the derivatives segment.

a. Click here to read the SEBI circular.

b. Click here to view the penalty charges.