Margin Shortfall Penalty NSE F&O Trading

Margin Shortfall Penalty NSE F&O Trading. A penal charge will be levied on the amount in default as per the byelaws relating to failure to meet obligations by any Clearing Member.

Type of DefaultPenalty Charge per dayChargeable to
Overnight settlement shortage of value more than Rs.5 lakhs0.07%Clearing Member
Security deposit shortage0.07%Clearing Member
Shortage of Capital cushion0.07%Clearing Members
Margin Shortfall Penalty NSE F&O Trading

Violations if any by the custodial participants shall be treated in line with those by the trading member and accordingly action shall be initiated against the concerned clearing member.

Short Reporting of Margins in Client Margin Reporting Files

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The following penalty shall be levied in case of short reporting by trading/clearing member per instance.

Short collection for each clientPenalty percentage
(< Rs 1 lakh) And (< 10% of applicable margin)0.5%
(= Rs 1 lakh) Or (= 10% of applicable margin)1.0%
Penalty Percentage short collection

If short/non-collection of margins for a client continues for more than 3 consecutive days, then penalty of 5% of the shortfall amount shall be levied for each day of continued shortfall beyond the 3rd day of shortfall.

If short/non-collection of margins for a client takes place for more than 5 days in a month, then penalty of 5% of the shortfall amount shall be levied for each day, during the month, beyond the 5th day of shortfall.

Notwithstanding the above, if short collection of margin from clients is caused due to movement of 3% or more in the Nifty 50 (close to close) on a given day, (day T), then, the penalty for short collection shall be imposed only if the shortfall continues to T+2 day.

All instances of non-reporting are treated as 100% short reporting for the purpose of levy of penalty.

Penalty and penal charges for margin/limit violation

Penalty for margin / limit violation is levied on a monthly basis based on slabs as mentioned below or such other amount as specified by the Clearing Corporation from time to time.

Instances of DisablementPenalty to be levied
1st instance0.07% per day
2nd to 5th instance of disablement0.07% per day + Rs.5,000/- per instance from 2nd to 5th instance
6th to 10th instance of disablement0.07% per day + Rs.20,000/- ( for 2nd to 5th instance) + Rs.10000/- per instance from 6th to 10th instance
11th instance onwards0.07% per day + Rs.70,000/- ( for 2nd to 10th instance) + Rs.10,000/- per instance from 11th instance onwards.
Additionally, the member will be referred to the Disciplinary Action Committee for suitable action.
Margin Shortfall Penalty NSE F&O Trading
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Instances as mentioned above refer to all disablements during market hours in a calendar month. The penal charge of 0.07% per day is applicable on all disablements due to margin violation anytime during the day.

FII/Mutual Fund position limit violation

In case of violation of FII/Mutual Fund limits a penalty of Rs. 5,000/- would be levied for each instance of violation.

Client wise/NRI/sub account of FII/scheme of MF position limit violation

In case of open position of any Client/NRI/sub-account of FII/scheme of MF exceeding the specified limit following penalty would be charged on the clearing member for each day of violation:

1% of the value of the quantity in violation (i.e., excess quantity over the allowed quantity, valued at the closing price of the security in the normal market of the Capital Market segment of the Exchange) per client or
Rs.1,00,000 per client, whichever is lower, subject to a minimum penalty of Rs.5,000/- per violation / per client.

When the client level/NRI/sub-account of FII/scheme of mutual fund violation is on account of open position exceeding 5% of the open interest, a penalty of Rs.5000 per instance would be levied to the clearing member.

Market wide Position Limit violation

At the end of each day during which the ban on fresh positions is in force for any security, when any member or client has increased his existing positions or has created a new position in that security the client/trading members will be subject to a penalty 1% of the value of increased position subject to a minimum of Rs.5000 and maximum of Rs.100000. The positions, for this purpose, will be valued at the underlying close price.

MCX Client Margin Reporting

Members have to mandatorily report details of margins collected from the clients to the Exchange.

The framework for collection of margins by members from their clients shall be as under:

Schedule for Collection of Margin by members from their clients:

Type of MarginTime to Collect
Initial MarginUpfront
Extreme Loss MarginUpfront
Additional MarginT + 2 days*
Special MarginT + 2 days*
Tender Period MarginT + 2 days*
Delivery Period MarginT + 2 days*
Mark to Market MarginT + 2 days*
Schedule for Collection of Margin by members from their clients

*The period of T+2 days has been allowed to members to collect margin from clients taking into account the practical difficulties often faced by them only for the purpose of levy of penalty and it should not be construed that clients have been allowed 2 days to pay margin due from them.

The members shall report to the Exchange by T + 5 day the actual short-collection/ non-collection of all margins from clients. Settlement holidays would not be considered for determining the T+5 reporting due date. Exchange shall levy penalty on the reported instances of short collection/ non-collection of client margin on the T+5 reporting due date.

Penalty structure for short / non-collection of margins from their clients beyond T + 2 working days:

For each member
‘a’Per day penalty as % of ‘a’
(<INR l lakh) and (<10% of applicable margin)0.5
(>=INR l lakh) or (>=10% of applicable margin)1.0
MCX Penalty Client Margin

Where a=short collection/ non-collection of margins per client per day

With respect to repeated defaulters, who default 3 times or more during a month, the penalty would be 5% of the shortfall in such instances. Every short/non collection of margin is to be considered as one instance of default. In case margin shortage is reported for a client 3 times or more during a month, i.e., either in consecutive instances or in 3 different instances, the penalty would be 5% of the shortfall from 4th instance of shortfall.

Example: Shortage is reported for a client on 1st and 2nd day of month consecutively; thereafter again on 10th day shortage is reported. So the number of instances are 3 and in case shortage is reported on any day later in the month, the penalty shall be 5% of the shortfall amount for all such instances beyond 3rd instance.

All instances of non-reporting shall amount to 100% non-collection of margin and the penalty as prescribed above shall be charged on these instances in respect of non-collection.

Implementation of these instructions shall be examined during the inspection of its members. If during inspection or otherwise, incorrect reporting on collection of margin from client by member is found, the member shall be penalized up to 100% of such amount short collected.

Margins exempted against early pay-in would not be considered for the margin reporting. Mark to market margin on the early pay-in positions shall continue to be considered for margin reporting.

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