In view of Margin penalties that are charged by the exchange, we have made the following changes in our system in the interest of customers to mitigate the cases which result in short-margin penalties.
Changes related to the closing of a hedge position (Effective from 22nd November 2022)
Our RMS will reject the order if you are trying to break the hedge by closing any individual leg which results in a margin shortfall. The Rejection message shown in the such scenario will be “Order rejected by RMS as Squaring off this position will result in margin shortfall of <Rs.11944>”
In such a case you will have to square off the leg which is consuming a higher margin first Or you may also add additional funds to the extent of the shortfall amount to close the position.
For Example:
Assume you have created the below position by executing orders at market price
You had an available margin of Rs. 50000 in your account while the margin required for creating this hedge position was Rs. 46000
Buy Nifty 18300 CE 1 Dec 2022 @ Rs. 110 (Margin required for individual leg - Rs. 6000)
Sell Nifty 18500 CE 1 Dec 2022 @ Rs. 40 (Margin required for individual leg - Rs. 84000)
Suppose you close the buy leg first then your margin requirement will shoot up, as for the sell leg in the above example margin required is 84000 while the available margin with you was only 4000
If we allow this trade then your available margin will run into negative resulting in a margin shortfall.
Hence to safeguard you from margin shortage our risk management system will reject this order
To close this position you will have to square off the sell leg first and then square off the buy leg or add Rs. 80000 (84000-4000) to your account so as to close the buy leg first