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Navia Risk Policy on settlement of compulsory delivery derivative contracts from November2019


Posted on 01-Nov-2019 Comments  0

Dear Client,


Greetings from Trade plus!!!. 


We wish to notify Navia’s modified Risk management Policy on settlement of compulsory delivery derivative contracts from November2019 expiry onwards. Request you to take note of the same and understand the physical delivery of the derivative contracts. 


What does compulsory physical delivery mean?


As stated in this SEBI circular, starting from July 2018 expiry, F&O positions are being moved from cash settlement mode to compulsory physical delivery settlement in a phased manner. Starting from October 2019 expiry, all stock F&O contracts will be compulsorily physically settled. If you hold a position in any Stock F&O contract, at expiry, you will be required to give/take delivery of stocks. Please CLICK HERE to read the SEBI circular on compulsory physical delivery. 


The deliverable quantity is computed as under:


Unexpired Futures


  • Long futures shall result in a buy (security receivable) position
  • Short futures shall result in a sell (security deliverable) position


In-the-money call options


  • Long call exercised shall result in a buy (security receivable) position
  • Short call assigned shall result in a sell (security deliverable) position


In-the-money put options


  • Long put exercised shall result in a sell (security deliverable) position
  • Short put assigned shall result in a buy (security receivable) position


The quantity to be delivered/received shall be equivalent to the market lot * the number of contracts that result in a delivery settlement.


This is a significant change to how these contracts were settled earlier – by cash. Also, since most people trading F&O usually have just a small portion of the overall contract value blocked as margins (Futures and Short Options) or premium (Long calls & puts), the actual obligation of taking or giving delivery can be exponentially higher. This increases the risk for us as a brokerage firm significantly. 


On 19th September 2018 we notified you on our policy for physically settled derivative contracts. 


We have now modified our RMS policy with regards to physically settled derivative contracts as follows:


  • We will now allow fresh positions in current month expiry contracts in NRML/MIS/CO/BO upto 1 day prior to the expiry of the contract. On the expiry day all overnight NRML positions would be uploaded as MIS positions which would be compulsorily auto squared off by the risk management system (RMS) upto 30 minutes prior to the market closing, if not closed by the client. Call N Trade charges would apply if the position is auto closed by the RMS.

  • Such MIS positions cannot be converted to NRML for expiry day contracts.

  • Navia shall not allow any scrip to be settled for physical delivery on the expiry day.

  • Since margins are applied and increased on a graded manner for In the money (ITM) contracts from 4 days prior to expiry, penalty and interest charged on margin shortfall, if any would be debited to client account. 

  • Increased margin imposed on the physical delivery of the contracts during the expiry period ( 4 days) , will be debited to the client ledger but shall not be applied to the trading terminal during the trading day, hence there can be a difference in the shortfall of margin amount reported from the ledger and trading day margin in the trading terminal. ( Please follow the back office ledger margin shortfall report) 


You are requested to take note of the above changes and trade or roll over the expiry month options contracts accordingly. Please write to us at support@tradeplusonline.com or reach us on our customer support desk 044-49427576, 044- 28214171 for any clarification.


With Best wishes


Tradeplus Team


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