Types of Margins

TYPES OF MARGINS

The Margin system for Futures and Options segment of NSE is explained below:

  1. INITIALMARGIN: Initial margin in Futures and Options segment is computed by NSCCL upto client level for open positions of CMs/Tms. These are required to be paid upfront on gross basis at individual client level for client positions and on net basis for proprietary positions. NSCCL collects initial margin for all the open positions of aCM based on the margins computed by nse india -SPAN. A CM is required to ensure collection of adequate initial margin from his TMs upfront. The TM is required to collect adequate initial margin up-front from his clients.
  2.   PREMIUM MARGIN: In addition to initial margin, premium margin is charged at client level. This margin is required to be paid by a buyer of an option till the premium settlement is complete.
  3. ASSIGNMENT MARGIN: Assignment margin for options on securities: Assignment margin is levied in addition to initial margin and premium margin. It is required to be paid on assigned positions of CMs towards interim and final exercise settlement obligations for option contracts on stock market tips individual securities , till such obligations are fulfilled. The margin is charged on the net exercise settlement value payable by a CM towards interim and final exercise settlement.
  4.     CLIENT MARGINS: NSCCL intimates all members of the margin liability of each of their client. Additionally members are also required to report details of margins collected from clients to NSCCL, w’hich holds in trust client margin monies to the extent reported by the member as having been collected from their respective clients stock futures.

ADJUSTMENTS FOR CORPORATE ACTIONS

The basis for any adjustment for corporate actions is such that the value of the position of the market participants, on the cum and ex-dates for the corporate action, continues to remain the same as far as possible. This facilitates in retaining the relative status of positions, namely IN THE MONEY, AT THE MONEY and OUT OF MONEY This also addresses issues related to exercise and assignments.

Corporate clients can be broadly classified under stock benefits and cash benefits. The various stock benefits declared by the issuer of capital are bonus, rights, merger/de-merger, amalgamation, splits, consolidations, hive-off, warrants and secured premium notes (SPNs) among others. The cash benefit declared by the issuer of capital is cash dividend.

Any adjustment for corporate actions is carried out on the last day on which a security is traded on a cum basis in the underlying equities market, share trading courses,  after the close of trading hours. Adjustments may entail modifications to positions and/or contract specifications as listed below, Such that the basic premise of adjustment laid down above is satisfied.

  1. STRIKE PRICE
  2. POSITION
  3. MARKET LOT/MULTIPLIER

The adjustments are carried out on any or all of the above, indian stock market, based on the nature of the corporate action. The adjustments for corporate actions are carried out on all open, exercised as well as assigned positions.

 

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