Decoding Daily Margin Statement

Daily Margin statement is an important document, sent by your broker, that gives you information about the available trading margin in your account on a particular trading day. The primary objective of a daily margin statement is to ensure that investors remain informed of the status of their margins at all times. This way, unfavourable situations like margin shortfalls and penalties for non-maintenance of adequate margins can be avoided. To help you understand the finer details of the daily equity margin statement, we’ve deconstructed a typical margin statement and explained the different terms commonly used in it.

Daily margin statement consists of two kinds of margin-related sections. The first is the fee levied by the stock exchanges as margin money for each trade. The other is relevant when you do not have sufficient funds to cover your trade value so you pledge stocks with your broker and avail a margin on the same.

Here’s an overview of each of these two types.

• Margin levied by the stock exchanges

  According to SEBI, all stockbrokers are required to collect a margin from investors participating in the cash market on behalf of the stock exchanges. The margin thus collected has three components — Mark to Market (MTM) margin, Value at Risk (VaR) margin and Extreme Loss Margin (ELM).
  This is done to ensure that all orders are settled seamlessly, without encountering any issues like a shortfall of funds. Investors who don’t maintain adequate margins may either be barred from entering into a trade or have their position prematurely liquidated.

• Margin offered by the stockbroker

  Some stockbrokers like m.Stock offer margin trading facility where they lend you money against capital or margin in your trading account. In exchange, the purchased shares are pledged with the broker and investors have to pay interest on the borrowed capital. m.Stock charges one of the lowest MTF interest rates, starting @ 6.99%. MTF not only reduces your out-of-pocket costs but also helps you take on larger positions easily.

Daily Margin Statement Explained

• Segment

  This section contains details of all the segments that you’ve traded in. EQ represents the equity segment, FO or F&O represents futures and options (derivatives) and CDS represents commodities.

• Trade Date

  In this section, you will find the dates on which you executed each trade.

• Funds Available in the Trading Account

  Any unused funds in your trading account will show up under this section.

• Margin Availed by Pledging Stocks

  This section contains the details of the margin that you availed by pledging stocks you own with your stockbroker.

• Other Approved Margins

  If you’ve sold any stocks during a trading day, 80% of the sale value is considered as the margin available for future trades. This sum will show up under this section.

• Total Margin Available For Use

  The total margin available is the maximum amount that you can use as a margin. It is the sum of the following amounts:
  • The funds present in your trading account
  • The margin availed by pledging stocks
  • Other approved margins

• Margin Required

  This section contains details of the margin required by the exchange for a trade. It includes the Value at Risk (VaR) margin, Extreme Loss Margin (ELM) and Mark to Market margin (MTM).

• Margin Collected

  The amount of margin actually collected by your stockbroker for a particular trade is displayed in this section.

• Margin Excess or Shortfall

  If the margin collected exceeds the margin required for a trade, there would be a margin excess. On the other hand, if the margin required exceeds the margin collected, there would be a shortfall. This section tells you whether you have a margin excess or shortfall at the end of the trading day.

• Margin Status

  This section gives you a preview of your margin status. It can be positive or negative. If you have a margin excess, the status will be positive. On the other hand, if you have a margin shortfall, the balance under this section will be negative. This means that you will have to deposit additional funds to be able to trade or hold your current positions. Failure to do so may lead to a penalty or premature liquidation of existing positions.

• Penalty Charged

  The details of the penalty levied for margin shortfalls will be displayed in this section.
  Now that you know what the terms used in a daily margin statement are, you should be able to understand the report your stockbroker sends you each day. If you are serious about investing in the stock market but do not have adequate capital, then try m.Stock’s Margin Trading Facility (eMargin) and enjoy up to 80% funding in 700+ MTF stock list at one of the lowest interest rates in the industry starting from 6.99%!