What is Square off Process?

What is Square off Process?

The square-off process involves closing out open trading positions to manage risk and ensure compliance with trading rules. Here are the scenarios in which the risk team might initiate a square-off:

1. T+6 Debit Square Off (Daily at 3:15 PM)

  • Description: For clients with debit balances from the purchase of non-approved stocks, a square-off is initiated on the 6th working day (T+6). Approved stocks include categories E, A, B, C, and D. For non-approved stocks, the square-off occurs if there's a debit balance. Square off applies only on weekdays.
  • Exceptions:
    • If the debit balance is less than ₹1,000.

2. T+90 Debit Square Off (Daily from 3:00 PM)

  • Description: For clients with a debit balance exceeding 90 days, the risk team will initiate a square-off on the 91st day. This process involves selling stocks to cover the debit balance. The risk team will decide which stocks to sell.
  • Exceptions:
    • If the debit balance is less than ₹1,000.

3. Risk-Based Square Off (Daily from 9:15 AM)

  • Description: If the Gross Holding Value Cover (GHVC) is less than 20%, the risk team will square off positions based on liquidation slabs:
    • GHVC 1%-17%: Liquidation up to 100% of the debit balance.
    • GHVC 18%-20%: Liquidation up to 75% of the debit balance.
  • Note: GHVC excludes Z Category stocks. For margin shortages in derivatives, square-off will be proportional to the shortage.

4. DPR-Based Square Off (Anytime During the Day)

  • Description: For short positions in stocks nearing their Daily Price Range (DPR) upper threshold, the risk team will square off the position. Thresholds are:
    • 4% Tier (5% Circuit Stocks)
    • 8% Tier (10% Circuit Stocks)
    • 16% Tier (20% Circuit Stocks)
  • Note: Only intraday positions are considered; holding positions are excluded.

5. Intraday Square Off (Daily from 3:20 PM)

  • Description: All intraday positions (cash and derivatives) are squared off after 3:20 PM, including cover orders, bracket orders, and stop loss orders. The system halts new intraday orders at 3:19 PM, clears pending orders, and squares off remaining positions.

6. Real-Time Risk-Based Square Off (Anytime During the Day)

  • Description: In case of high volatility causing losses greater than 50% of the customer's net worth, the risk team will square off all open positions. This includes intraday trades in cash and derivatives and overnight positions in derivatives.
  • Note: Delivery holdings are excluded.

7. FNO (Currency and Equity Derivatives) Shortage

  • Description: For Mark to Market (MTM) debit or margin shortfalls, RMS liquidation occurs on a T+1 basis. If a shortfall occurs during the day, it is squared off on the same day.

8. Physical Settlement in Equity Derivatives (Before Expiry Day)

  • Description: Stocks due for physical settlement are blocked from trading on the Wednesday before the last Thursday of the expiry month. Clients will receive a notice to square off their positions before the last expiry day. If not squared off, the risk team will initiate square off on the expiry day.

9. Commodity Square Off

  • Intraday Square Off:
    • For Agri Commodities (other than the evening session): Square off at 4:30 PM.
    • For Agri Commodities (evening session): Square off at 8:30 PM or 9:00 PM.
    • For all other commodities: Square off at 11:00 PM or 11:25 PM.
  • Auto Square Off System (MTM-Based): Positions are squared off if MTM loss reaches 50% of the available net worth.
  • Margin Square Off: Positions lacking sufficient funds may be squared off by the RMS desk at their discretion.
  • Physical Delivery: Positions with compulsory delivery are closed a day before the delivery intention period. No fresh positions are allowed during the tender period.

Other Considerations:

  • General Note: 5Paisa may initiate square-off without prior notice due to market volatility, SEBI regulations, or other reasons.
  • Intraday Square Off Disclaimer: It is recommended that customers manually square off their intraday positions. Unclosed positions will be auto-converted into delivery products and carried forward to the next trading day.

Note: It is advisable to use UPI or IMPS for real-time balance updates.


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