PENALTY CHARGED FOR PEAK/EOD SHORTFALL TO BE REFUNED BY BROKERS

Margin Penalty Is Levied Whenever There’s A Shortfall In The Available Margins In The Client’s Account. Margins Are Charged By The Exchange In The Equity & In The Derivative (Equity Derivatives, Currency Derivatives & Commodity Derivative) Segments.

How its Levied

Suppose a Trader think NIfty is Bullish on Expiry day and is trading at 17900. He want to short 17800 PE and has only 1.5 Lakh avilable in account

He can Buy 17000 PE to rediuce Margin and Short 17800 PE.

But when he is booking Proift he forget to Square off the Hedge he will be charged Peak Margin Penalty.

Sample Calulation as Below

Peak margin requirement Rs. 1043827.6
Peak margin collected: Rs. 404138.2
Considering 100% of peak margin requirement, margin shortfall: Rs. 639689.4
Penalty 1% on margin shortfall: Rs. 6396.894
18% GST on penalty: Rs. 1151.44092

The total penalty for the shortfall on 28/04/2022 was Rs. 7548.33492

 

Readers can check there You can check for the same in the Margin statement provided by Brokers. Many people who do not see statement do not know if they have been charged. If you have been charged you should get Refund as per below circular.

As per Sebi/NSE circular penalty needs to be reimbursed.

As Per Economic Times

In order to prevent any peak margin shortfall, please note that if you enter into a hedged position(let’s say a short option hedged with a long option position) with margin benefit, kindly square off the higher risk leg first which would be the short option leg as per our example. Otherwise, if you square-off the long option position first, the only leg left would be the short option position and since you do not have the margin benefit now, the margin requirement would shoot up and you may be liable for a peak margin penalty although by the end of the day you might not be having any end of the day margin shortfall as you may square-off both the option legs of your hedged position.