Limits Vs Margins

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Margins are the “deposits” that are to be considered for reporting shortfall. While limits are what are available for you to trade the next day. Remember that Partners can always visit PLClients>Risk>Reports>Combined limit to understand what computation has gone into creating limits on ODIN for the next day.

There are 3 main reasons why this difference happens:

  1. The exchanges give leeway in reporting stock collateral value for margins on VAR basis (Example, a stock may have a VAR Margin of 25% but after combining Exchange ELM and Exchange Ad Hoc Margins – which PL takes for giving limits – the haircut may be 100%) but at times, the final haircut (VAR+ELM+AD HOC) may be much higher than this and therefore, from a risk perspective, we may not give any limits even though the DMR shows margin available.
  2. The second major source is the ledger itself – For margin purposes, the exchange allows the broker to consider what is known as the settled ledger (Ledger balance as of today end excluding future debits/credits) while for limit purposes, we consider what is the final ledger balance (after considering all future sales and purchases)
  3. The other difference is in the treatment of all components of what makes a “deposit”- the regulations and the practical issues faced by a broker mean that the treatment may be very different for some components as the following table clarifies:
Component  Limit TreatmentDaily Margin Report
CUSA STOCKConsidered with Exchange Haircut (VAR+ELM+Ad Hoc)Considered with Exchange VAR Margin only
PLEDGE STOCKConsidered with Exchange Haircut (VAR+ELM+Ad Hoc)Considered with Exchange VAR Margin Only
DP POA UNPLEDGED STOCKNot ConsideredNot Considered
SALE ON T DAY80% value is given as limit from DP Free holding 20%+Exchange Margin% is deducted from CFS for Pledged stockEarly Payin (EPI) value will be considered up to 80%
SALE ON T-1 DAY100% value is available as marginEPI value up to 100% will be considered
PURCHASE ON T DAYAmount deducted from MarginNot considered
PURCHASE ON T-1 DAYAmount Deducted from MarginNot considered
HAIRCUT USED FOR VALUATIONExchange Total Margin (VAR+ELM+Ad Hoc)Exchange VAR margin only
DATE USED FOR VALUATIONT-1 day Closing PriceT-1 day Closing Price
PROFITS ON T DAY – CASH SEGMENTNot considered for marginNot considered for margin
PROFITS ON T – DAY FNO SEGMENTNot considered for marginNot considered for margin

For any clarifications on above, do write in to us at customerconnect@plindia.com

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