BNST (Buy Now Sell Tomorrow) trades in Margin Trade Funding (MTF) are not allowed, unless gross margins are available for two separate legs.
Execution of Sell Transactions on T+1 requires additional margins, since no delivery of shares is involved. This is because delivery for shares bought previously will be received on T+2.
This gives rise to margin shortfall penalties since the system does not recover this additional margin from clients on MTF trades.
Kindly make sure the square-up of MTF positions are executed only after delivery has been received on T+2.
You have bought 100 shares ITC @ 200 on 12 September on MTF, delivery of which will be received on 14 September (T+2). You paid 25% of (100 x 200) = 5000 as upfront margin MTF. If you sell the MTF position on 13 September (T+1) @ 220, there will be margin levied on the sell leg, since delivery on buy is expected on 14 September. Hence, there are no shares to be delivered as Early Pay-in on 13 September. Suppose Exchange levies minimum margin @ 20% on ITC, you will have to maintain a total of 40% margin on Buy & Sell leg combined, 20% each on both legs. Total Margin = [(20% of 200) + (20% of 220)] x 100 = Rs. 8400 Since you have only paid 25% as upfront margins while buying stock on MTF (Rs 5000), there will be a margin shortfall of Rs 3400 (8400 - 5000), on which penalty will be levied. You could have executed BNST trades, if you would have maintained a total margin of Rs 8400 in your account. Please note that the system will not release the Rs. 5000 margin levied on MTF on execution of sell leg of BNST, instead you will be charged Rs 3400 additional margins, thus totalling to Rs 8400.