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A margin statement offers you a quick view of the free margins available to you including any excess or shortfalls. This allows you to take new positions on the next trading day without incurring charges or penalties.

All stock broking companies have been mandated by the Securities and Exchange Board of India (SEBI) to send all investors a daily margin statement. If you trade on multiple exchanges, then you will receive a combined margin statement with details about all the segments that you have taken positions in.

Margins can be understood in two ways:

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1. The money borrowed from the stockbroker to take new positions in the stock market. Most brokers offer investors loans to take new positions in the market.

They usually extend this across all market segments like equities, derivatives, and currencies. The broker offers this loan by using the securities held by you as collateral.

2. The margins mandated by the stock exchanges or clearing corporations.

At Groww, no securities are held as collateral as of now. All margins are determined by the amount held by the user in Groww Balance or securities sold but not settled. 

The daily margin statement contains information about the following things in a format prescribed by SEBI. 

  • Name of the client, client code, Trade Date and Exchange.
  • Total margin deposited till T-1 day.
  • Margin utilized by the end of T-1 day.
  • Margin adjustments for the day if any.
  • Margin status at the end of the day, among other things.

In this article, let us understand in detail what the daily margin statement is and how to read and interpret it. Read on!

What Does a Daily Margin Statement Look Like?

You will receive a combined daily margin statement if you have been trading on all exchanges. This is how the DMS you will receive from Groww will look like. The DMS is password-protected, you can access it by entering your PAN as the password. 

Image 1 

Daily Margin Statement

Image 2

Daily Margin Statement 1

Image 3 

Daily Margin Statement 2

Image 4 

Daily Margin Statement 3

Let’s take a quick look at the components of a Daily Margin Statement.

If you look at Image 1, the DMS has the following components:

Margins Available Till T day

1. Segment

Since the broker can offer the margin facility across various segments and exchanges, this column shows the segment where you have been trading. For example, if you are trading in the BSE and NSE across equities and derivatives, then the segment will display all these segments along with the respective trade.

In the example above:

This column will tell you about the clearing corporation and the market segment. As you can see above, the segment is ICCLCM. This stands for Indian Clearing Corporation Limited (ICCL) – Cash Market. ( BSE+NSE)

2. Trade Day (T)

This is the day on which you had traded in the said segment.

In the example above:

This statement is for trades done on July 03, 2020

3. Days

The first entry is about margin for today’s trade (T day). The second entry is about margin for trade done yesterday (T+1 day). The third entry is about the margin for the trade done the day before yesterday (T+2 day).

4. Funds (A)

This is the balance in your margin account or ledger balance. So, if you have deposited Rs.50000 and  buy shares worth Rs.10000, then the Funds column will show a balance of Rs.40000. Remember, if this column has a negative value, then it indicates that you have utilized your deposited funds and are using the margin money for trades.

In the example above:

This is the amount in the Groww balance (currently Rs.5431.54). This data is till 5 pm. Hence, you should not worry if there is a mismatch.

You can see the breakup of the available funds by clicking on it (refer image 2).

5. Value of Securities After Haircut (B)

When you sell shares, the broker debits your Demat account and credits the pool account for delivery. The settlement happens in T+2 days. Since the broker offers margin benefit to you, this column tells you the value of stocks lying in the pool account.

Also, some stockbrokers offer a loan against shares held by you as collateral for trading in the market. Since stock prices are volatile, the broker does not offer 100% of the stock’s market value as a loan. He sanctions a lower amount to cushion against the price volatility.

It can from one broker to another and also on the volatility of the specific shares. This difference between the market price and the sanctioned loan against the share is called ‘haircut’. Usually, brokers determine a haircut rate that is not less than the VAR (Value at Risk) rate of the said security on the T-1 day.

VAR – The Var Margin is a margin that intends to cover the largest loss that can happen on 99% of the days ( 99% value at risk). It is a statistical measure that can help you determine how much a stock can lose using historical data. So, if you buy a stock at Rs.100 per share and it can go down by maximum Rs.10 (as per historical data), then the VAR is 10%.

Let’s understand how the value of securities or ‘B’ after the haircut is calculated:

Assume that you are holding 100 shares of Reliance Industries. When we need to calculate B, we will look at the market price on the T-1 day. So, if we need to calculate B for June 2, 2020, then we will look at the market price of Reliance Industries for June 1, 2020. We will also look at the haircut rate on T-1 day. Here is the calculation:

  • Number of shares = 100
  • Market price (T-1 day) = Rs.1000
  • Haircut rate (T-1 day) = 12%

Therefore, the market value on T-1 day before haircut will be,

Market value before haircut = Number of shares x Market price (T-1 day)

= 100 x 1000 = Rs.100000.

Also, the market value on T-1 day after haircut will be,

Market value after haircut = Number of shares x [Market price (T-1 day) – {Market Price (T-1 day) x Haircut Rate/100}]

= 100 x [1000 – {1000*12/100}] = 100 x [1000 – 120] = 100 x 880 = Rs.88000.

Hence, the broker will consider this amount for extending a loan against the said security. Further, it is important to remember that on a daily basis, the exchange declares a VAR for each security. The broker can choose a haircut rate that is equal to or greater than the VAR based on his risk management policy. So, if the VAR of a security is 12%, the broker can choose a haircut rate of 20% if he feels that he wants to take a lower exposure on the said security.

In the example above:

The value of securities after the haircut is Rs.1906.60.

6. Bank Guarantees/FDR (C)

This column provides the amount of bank guarantee or fixed deposit provided by you to the broker as the initial margin for trading.

7. Any Other Approved Form of Margins (D)

There are various other forms of collecting margins from investors. The broker can choose to offer them to his clients at his discretion. These include units of liquid mutual funds, government securities, etc.

8. Total Margins Available (E)

This is calculated by adding Funds (A), Value of securities after a haircut (B), Bank Guarantees/FDR (C), and other approved forms of margin (D).

Therefore,

Total margins available (E) = A + B + C + D

Remember, this will be displayed separately for every exchange and segment. This is the margin available on the trading day for the said segment.

In the above example:

Since this is a summation of the available funds in your Groww balance and value of securities after haircut (the remaining fields are currently not applicable), 

The total available margin = 5431.54 + 1906.60 = Rs.7338.14.

Margin/ Consolidated Crystallized Obligation required by Exchange/CC by the end of T day

9. Total Upfront Margins (F)

In the cash segment, this is a summation of VAR, ELM, and MTM.

In the futures segment, this is the sum of the SPAN margin and exposure margin. Here are the details:

Stock exchanges govern futures options and margins by using a calculation algorithm called SPAN margining. SPAN or Standard Portfolio Analysis is a complex methodology that helps you calculate the worst possible loss of any portfolio over a specified period. SPAN computes profits and losses under various market conditions and determines a margin amount required by the investor to make a specific trade.

The exchange also levies an additional margin over and above the SPAN margin to the broker who usually passes it on to investors. This is to cushion against any mark-to-market (MTM) losses. This is to hedge against price movements.

For example, if you take a long position in SBI futures with a SPAN margin of 10% and an exposure margin of 5%, then here is how the total margin is calculated:

  • Position: 1 lot long on SBI futures
  • Lot size: 5000
  • Price: 200
  • Contract Value: Rs.10 lakhs
  • SPAN margin: Rs.1 lakh {Contract value x SPAN rate/100 = 1000000 x 10/100}
  • Exposure margin: Rs.50000 {Contract value x Exposure rate/100 = 1000000 x 5/100}

Therefore, the total margin will be computed as follows:

Total margin = SPAN margin + Exposure margin = 100000 + 50000 = Rs.1.5 lakhs.

In the above example:

Since Groww is not offering derivatives trading, the total upfront margin will include the total margin blocked for trades done today. You can view details about the same by clicking on it (refer image 3).

As you can see in Image 3, the total margin (VAR + ELM) requirement for trades done today adds up to Rs.12623. You had a carry forward margin balance of Rs.2721. Adding them gives you a total upfront margin requirement of Rs.15344. You can also see a similar breakup of the MTM margin requirement.

10. Consolidated Crystallized Obligation (G)

In trading, crystallization is when you close a position and reopen an identical position immediately. While the margin system of the clearing corporations levied margins on the net buy value of the unsettled trades (cash segment) and net open positions (derivatives segment), crystallized obligations were not captured. Hence, SEBI decided to collect a margin on consolidated crystallized obligations considering all futures and options positions.

In the above example:

This will show you the MTM margin requirement. In this DMS, the MTM is Rs.424.

11. Total Requirement (H)

The total margin requirement by the exchange at the end of T day is as follows:

Total Requirement (H) = Total Upfront Margins (F) + Consolidated Crystallized Obligations (G)

In the above example:

The top row shows the total upfront margin needed in today’s trade and the bottom row shows the total MTM margin amount – Rs.15343 and Rs.424 respectively.

Excess / Shortfall w.r.t. Requirement by Exchange / NSCCL (I)

The difference between the total available margins (E) and the total margin requirement by the exchange/clearing corporation (H) will be the excess or shortfall. Therefore,

I = E – H

If this column is negative, then you owe the broker the said amount. If it is positive, then you have a margin balance available to your credit.

In the above example:

The value is negative. Hence, you owe the amount specified in this column to the broker.

Additional Margin required by member as per RMS (J)

Some brokers can levy an additional margin over and above the margins levied by the exchange/clearing corporation. In such cases, the brokers specify this in their Risk Management Policy document and display this additional margin requirement in this column.

12. Margin Status (K)

This column tells you about the balance that is available to you for trade on the next trading day. It is calculated as follows:

K = I – J

A negative value indicates a shortfall in the margin.

Currently, Groww is not offering future and options (F&O) and derivatives trading. However, the format is standard and once F&O is launched, the margin details of those trades will be included too.Also, we are not offering loans against shares or collateral. Hence, a few segments of the DMS will remain blank. 

Summing Up

Now that you understand the individual components of a Daily Margin Statement, you can understand the margin amount utilized by you and how much you have available for trade the next day. This statement gives you a bird’s-eye view of the margin balance and helps you plan your trades accordingly.

Happy Investing!

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