Comment on Zerodha - Margin Policies

vinayak commented on 17 Dec 2014, 10:31 AM

Dear Venu

I’m not planning to keep outstanding margin, the question is to deal with conditions of high volatility when the available margin may dip a little below SPAN+exposure requirement (e.g. by about 20% of the exposure margin requirement; may be 5-7% of the overall requirement) for perhaps a day, may be two (near a weekend). At the time of entering the position I keep some extra money in the account; however if the market turns suddenly then I may not realize in time that margin has gone low before the market close. My positions are always cross-hedged (small in individual securities; overall hedged by both long-short in options) such that shortfall even with a 10% single day fall in any stock or broader index will not cause margin to go below SPAN.

My problem with “discretion of our team” is – they may not understand what is going on and may square off the wrong thing. Zerodha doesn’t give margin calls so there is no way I would be able to close a few positions on my own. And as last week has shown I may not even be able to logon to the system even if I had an idea that something is going wrong.

Hence the question about square off – Nithin had earlier on this blog (on Nov 1 and Nov 4) commented that positions will not be automatically closed as long as there is enough money to cover SPAN margin.

Here are two other questions:

(1) Earlier Nithin has written in this blog that the interest chargeable is on the amount by which margin is short over the SPAN-only. If there is enough money for SPAN but not enough for SPAN+exposure then NSE will not charge interest. Is that still true?
(2) whether there will be automatic square off of positions in case SPAN + 50% of the exposure margin is still covered by the cash available at 3:20PM (perhaps with some sort of an email warning to close the positions next day)?

This also leads to some feedback from me – on the new platforms and software you are planning perhaps it may be a good idea to generate some automatic alert emails if the margin is going in dangerous territory and/or too much volatility is suddenly coming in. Even if we do have funds, mobilizing them into your accounts may take a few hours and better to have some forewarning.

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