What is peak margin penalty and how does it work?
From December 1, 2020, SEBI has introduced new norms for intraday peak margin reporting where clearing corporations will randomly take minimum 4 snapshots during the day of all the margins and highest margin out of these snapshots will become peak margin. That suggests, you must have the highest margin of these four snapshots in your current FNO limit. Failure to do so would result in peak margin shortfall and penalty thereon.
Let’s understand this with the help of an example –
Assume you have created a long position in Nifty where initial margin requirement was Rs.1,30,000 but during the day exchange increased the margin requirement to Rs. 1,40,000. Here, the system will first check if you have additional Rs. 10,000 available. If yes, then the amount will be blocked based on fresh span files processed in our trading systems during the day. However, if you do not have such additional margin, it results in a peak margin shortfall on which the exchange would levy a penalty.
So, if you have only Rs. 1,30,000, a peak margin penalty of Rs. 50 (Rs. 10,000*0.5%) will be charged
Penalty amount in case of shortfall
Below is the penalty percentage that will be levied in case you fail to maintain SPAN+ELM, or exchange required margin –
| Short collection for each client | Penalty Percentage |
|---|---|
(< Rs 1 lakh) And (< 10% of applicable margin) | 0.5% |
( = Rs 1 lakh) Or (= 10% of applicable margin) | 1.0% |
If shortfall margins continue for more than 3 consecutive days, then a penalty of 5% of the shortfall amount will be levied for each day of continued shortfall after the 3rd day of shortfall.
If shortfall margins for a client take place for more than 5 days in a month, then a penalty of 5% of the shortfall amount will be levied for each day during the month after 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.
Click here to view the circular from the Exchange on peak margin penalties.
To avoid penalties due to margin shortfall, add funds before midnight the same day.