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Independent Financial DistributorSPAN Margin
SPAN (Standard Portfolio Analysis of Risk) Margin is the basic margin required to create a Futures or Commodity derivatives segment position in the derivatives segment. It is calculated based on various market scenarios to estimate the maximum possible loss a position could face in a day. The exchange uses a risk-based model to determine this amount. In simple terms, SPAN margin ensures that if the market moves unfavorably, there are sufficient funds available to cover potential losses. It forms the foundation of margin calculation in F&O trading.
Exposure Margin
Exposure Margin is charged over and above SPAN margin to provide additional safety against market volatility. While SPAN covers calculated risks, exposure margin acts as an extra cushion in case the market becomes more volatile than expected. This additional layer of protection strengthens the overall risk management system and helps maintain stability during uncertain market conditions.
Extreme Loss Margin (ELM)
Extreme Loss Margin is collected to protect against sudden and sharp market movements that may occur due to unexpected events. It applies in both the Equity and Derivatives segments. ELM acts as a safeguard during rare but severe market disruptions, ensuring that the system remains protected even in extreme situations.
VaR Margin (Value at Risk)
VaR Margin is applicable in the Equity Cash segment and covers the potential daily price movement risk of a stock. It is calculated based on how much a stock is likely to fluctuate under normal market conditions. This margin ensures that regular day-to-day volatility is adequately covered, reducing the risk of shortfalls.
Peak Margin
Peak Margin is determined based on the highest margin used at any point during the trading day. Even if a trader reduces or closes the position later, the system checks whether sufficient margin was maintained at the peak usage time. This rule promotes disciplined trading and ensures continuous availability of required funds throughout the day.
Delivery Margin
Delivery Margin becomes applicable when a position results in physical delivery, particularly in stock derivatives or commodity contracts. Since delivery obligations involve actual transfer of shares or goods, higher margin is required to ensure smooth settlement. This margin safeguards the integrity of the delivery process.
Tender Margin
Tender Margin applies in commodity futures when the contract enters the tender period. During this phase, participants may to take or give intentions for physical delivery. To manage the increased risk associated with this stage, higher margin requirements are imposed. This ensures seriousness and financial readiness of traders holding positions during the tender period.
Additional Margin/ Adhoc Margin
At times of high market volatility or special events, the exchange may impose Additional or Adhoc Margin. This temporary increase in margin requirement helps manage elevated risk levels and prevents excessive speculation. Once market conditions stabilize, the additional margin may be withdrawn.