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What changes due to the new upfront margin requirements?

Upfront margins are required for all trades starting from September 1, 2020, as per this FAQ from exchanges and this circular from SEBI . This has the following effects:

1. Sale proceeds from holdings can be used to take new positions -

You can use 80% of sale proceeds from your stock holdings as soon as you exit them to enter new positions — other stocks or F&O positions.

As per the new peak margin regime, there is now a cap on maximum intraday leverages and only 80% of credit from selling your holdings will be available for new trades. The entire credit will be available from T+1 day. Check this Z-connect post for details.

Important:

1. If you sell your holdings and then buy them back after utilising the sale proceeds in other trades, a margin penalty as per the new peak margin rules may be levied.

2. In order to give you the benefit of being able to use the holdings sale credit immediately, we are resorting to debiting shares on T day and doing an Early payin to the Exchange. Till the time that the stocks are collected by the Clearing Corporation (T+2), the shares will be in the Early payin account on which certain corporate action benefit are not receivable. As such, if you wish to be eligible for any corporate actions, like buyback, please do not sell the shares and continue to hold them in your account till the Record date.

2. Using sale proceeds from T1 holdings -

Similar to your stock holding, you can sell the T1 holdings (stocks bought the previous day and yet to be credited to your demat) and use 80% of the sell value of the proceeds to buy new stocks for delivery. However, you will be able to use only 60% of this selling value towards F&O. Learn more .

3. Intraday profits can be used for new positions only after it is settled -

Your Kite balance will not include any intraday profits until they are settled by the exchange. The settlement of funds happens on the next trading day for F&O and after 2 trading days for equity. However, you can continue to see the funds from intraday profits in the closing balance on your Console ledger . For example - On Monday, you buy stocks worth Rs 2 lacs and sell them the same day for Rs 2.25 lacs, then Rs 2 lacs will remain available immediately for other transactions. However, Rs 25 thousand will be available in your Kite funds on Wednesday.

Further, in case the T+1 day (for F&O trades) or the T+2 day (for equity trades) is a settlement holiday, the intraday profits will be available on the next trade settlement day.

4. Option sell credit can be used only to buy options on the same trading day -

When you exit your long/buy option positions or enter new write/short options, the proceeds or credit of option premium can be used for only new long/buy option trades on the same trading day and only within the same segment (proceeds from equity options can’t be used for currency or vice versa). You can use these proceeds or option credit for all other types of trades only from the next trading day.

Note that the account balance on Console may not match with Kite balance. Your Kite balance will not include unrealized intraday profits until they are settled, while Console will show balance including intraday profits.

Click here to watch the video in Hindi for explanation of points above.

You can post any follow-on questions in this Trading Q&A thread .