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I saw margin penalty entries on my ledger. What is margin penalty and why have I been charged?

Margins are charged by the Exchange in the Equity & in the derivative (Equity Derivatives, Currency Derivatives & Commodity derivative) segments. Whenever you trade and carry forward a position on an overnight basis, you are required to maintain sufficient margins in your account. Margins are charged to cover for probable risk that arises out of price fluctuations. At Zerodha, we accept margins in the form of cash or collaterals (stock, mutual funds). Following are the margins levied by the Exchange in each of these segments:

Equity Equity derivatives Currency derivatives Commodity derivatives
VaR margin SPAN margin Initial margin Initial margin
Extreme loss margin Extreme loss margin Extreme loss margin Extreme loss margin
Additional margin Physical delivery margin Margin on crystallised obligation Delivery margin

Margin on crystallised obligation
Additional margin

All Stockbrokers are required to report to the exchange margins available in the client’s account as against the margins required for positions carried forward. This process of informing the Exchange, the margins available in a client’s account is referred to as ‘Margin Reporting’.

If the margins available in the account >= margins required by the Exchange, no penalty is levied.

If the margins available in the account < margins required by the Exchange, a penalty is charged by the Exchange on such shortfall.

The entries you see on your ledger are on account of you not maintaining sufficient margins in your account for your positions.

Note: In case you incur a margin penalty, the cut-off/ due date for reporting margin is T+5 days, so we post the entry on your ledger once we get the penalty file from the exchange i.e on T+6 day.