Why have I been charged a margin penalty?
Exchange is responsible for ensuring settlement for all trades, so it tries to ensure that all clients and brokers are covered against potential losses and defaults. Since Equities & Derivatives are leveraged products, the quantum of losses can spiral out of control very quickly. Hence, the exchange levies penalties to ensure compliance with the margin requirements.
Below are the margins levied by the exchange for different segments.
| Equity | Equity Derivatives | Currency Derivatives | Commodity Derivatives |
|---|---|---|---|
VaR Margin | Span Margin | Initial Margin | Initial Margin |
Extreme Loss Margin | Extreme Loss Margin | Extreme Loss Margin | Extreme Loss Margin |
Additional Margin | Margin on crystallised obligation | Margin on crystallised obligation | Additional Margin |
Physical delivery Margin | Delivery Margin |
At Kotak Securities, we accept margin in the form of cash, FDs or stock collaterals. When you trade and carry-forward a position on an overnight basis, you are supposed to maintain sufficient margin in your account. All stock brokers have to inform the exchange about the margin available in the client's account against the margin required. This is a daily process and is known as Margin Reporting. Let's say for a client's account, if
Margin available ≥ Margin required: No margin penalty levied
Margin available < Margin required: Margin penalty levied
In the second case, the margin penalty will be levied on the shortfall of margin.