Why does Zerodha increase Intraday margins for MIS and CO on days when the market is volatile?
Margins are collected from customers to ensure there aren’t any customer defaults. The minimum margin requirements are stipulated by the exchanges. Margins increase or decrease based on the volatility in the price of a security, higher the volatility - higher the margins and vice versa.
There are times when the minimum margin requirement from the exchanges are slow to catch up with the actual volatility in the market. For example, during events like election results, budget day, etc when the volatility is expected to go up, minimum margins required by exchanges do not update until the volatility actually hits the market. In such cases, Zerodha increases the margin, higher than the minimum required by exchanges. We revert it as soon as the volatility subsides or if a particular event passes without any volatility.