What is Margin Statement?

Stock market is a complex ecosystem that belongs to a huge range of customers. That’s why Securities and Exchange Board of India(SEBI) made a regulation for brokerage firms to send a daily margin statement. Do you know what is margin statement? & how to interpret it? Most of the people don’t understand it. Let’s discuss daily margin statement with example and related terms.

What is Margin Statement?

Investors have a variety of categories and asset groups to select from.  Someone may decide to trade in the cash market or deal in the derivatives market. Margin investing is available in all significant trading categories, offering traders leverage to extra funds.

Margin trading raises the amount of profit and loss potential. Since many traders use margin and trade in several sections, maintaining record of their funds can be complicated.

Daily, brokerage firms send a report to client’s to increase accountability and assist consumers in keeping track of their investments. This is known as the daily margin statement.

What is included in the Margin statement?

The report convinces the customer of the amount of usable margin that has been used. It provides an estimate of the account’s free margin, which can be used to open new positions without paying a penalty.

If you trade through any exchange on any business day, you will receive this report before the end of the business day. The daily margin statement, which is sent to the client on email, will include data from all of the exchanges.

If you trade through divisions, the daily margin statement would include information from all of them. If you trade on the Bombay Stock Exchange, for example, the BSE’s daily margin statement would include data from both the equity cash and equity derivatives segments.

Daily margin statement Format

The Securities and Exchange Board of India specifies a specific format for the daily margin statement. A standardized format ensures consistency and readability.

The following information must be disclosed by any brokerage in the margin statement:

How to Interpret it?

Meaning of Terms mentioned in the margin statement

Funds

In the F&O and CDS sections, this displays the closing balance of the specific segment’s ledger after reversing the impact of T-day credit. Equally, after reversing the impact of T-day and T-1 day credit, the closure value in the NSE EQ and BSE EQ sections is shown.

NSE EQ: After reversing the impact of T day and T-1 day credit, the NSE EQ ledger’s closure amount without margin.
BSE EQ: After reversing the impact of T day and T-1 day credit, the BSE EQ ledger closure amount without margin.
NSE F&O: After reversing the impact of T day credit, the NSE F&O ledger’s closure amount without margin.
NSE CDS: After reversing the impact of T day credit, the NSE CDS ledger’s closure amount without margin.
Mutual Funds: closure amount of the mutual funds ledger.

Example

Assume you deposit 70,000 rupees into your trading account. In the NSE EQ row of that day’s margin statement, Rs 70,000 will be reported under the Funds column.

If you buy Rs 50000 in F&O the next day, the NSE EQ row will display 70,000 and the NSE F&O row will display -50000 in the following day’s margin statement’s Funds column.

The net number, 30000, will be the uninhibited money remaining in your account at the close of the day, as shown by the subtotal of the Funds section.

Note

Brokerage firms should keep their ledgers separate for each section. Nevertheless, as is customary in the sector, all pay-ins will be reported to the ‘NSE EQ’ section on the margin statement, while debits will be reported to the relevant category ledger and reflected in the margin statement.

Value of Securities (after haircut)

After an effective haircut, this section includes the total value of investments. The portion includes the margin received upon pledging holdings. The brokerage withheld those investments.

The haircut amount cannot be less than the VAR margin rate. The VAR margin rate is set by the brokerage and is adjusted by compliance with the broker’s risk management policy.

Bank guarantees/FDR

The initial margin accessible after offering a bank guarantee or a fixed deposit is detailed in this section. It is usually provided against equity derivatives or currency sections in the daily margin statement.

Any other approved form of margin

It is essential to have an initial margin to participate in the securities derivatives or currency derivatives sections.

Total upfront margins

This covers any overall margins required by the exchange for the spots you’ve obtained, if any. The following are the margin values that were regarded for each section:

EQ = Total of VAR + ELM + Minimum Margin + Additional Margin
F&O = Total of SPAN margin + Exposure Margin + Physical delivery margin + Additional margin.
CDS = Total of SPAN margin + Extreme Loss margin + Additional margin

Consolidated crystallized obligation

This column displays the total MTM losses in the particular section, if any.

Total requirement

This displays the overall amount which the exchange has blocked for your spot, section by section. Total upfront margin + Consolidated crystallised commitment is how this is evaluated.

Excess/Shortfall w.r.t requirement by exchange

This section displays the difference between the ‘Total margin available’ and the ‘Total requirement’ amounts.

Additional Margin required by the member as per RMS(Risk Management System)

This section displays any extra margins that the broker has set aside.

Margin Status (balance with member/ due from the client)

This section displays the entirely free/uninhibited amount accessible for new positions the next business day.

Conclusion

The daily margin statement is an essential summary that shows the trader a clear picture of his or her everyday finances. The use of a margin facility offered by a broker has become a common way for traders to increase the size of their trades. With the growing use of margin trading, the significance of a daily margin statement has risen.

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