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.


    • Related Articles

    • Square off process in commodity market

      The Square off process in the commodity market refers to the action of closing out an existing position or trade before the end of the trading day. This is done to lock in profit or minimize losses. Here is a list of different square off processes: ...

    • Why does 5Paisa square off positions?

      5Paisa square off for various reasons. Here are some reasons to help you understand why it is done: Scenario 1: T+6 Debit Square Off Timing: Daily at 3:15 pm Criteria: Square off for clients purchasing NON-APPROVED Stocks. Exception: Debit less than ...

    • Can I square off Strategy Positions?

      Yes, you can square off existing positions initiated by your Smart Strategies. The process will square off all positions associated with the strategy and you will be able to view the realised profit or loss (P&L) on the dedicated Strategy P&L page ...

    • Process to Change/Manage Address

      To change or manage the address you need to follow the offline process as we have stopped accepting online requests from 1st January 2020. CLICK HERE to download the form and share it along with self-attested address proof by raising a ticket HERE ...

    • How do I square off the open position?

      Closing a single position or squaring off all positions on the 5 Paisa platform is straightforward. Here are the steps to follow: To close a single position: Navigate to the 'Net Position' tab on the 5 Paisa. Locate and select the specific position ...