Currency FAQ

 

a) Why Currency Derivatives

b) Account opening

c) Trading in Currency Derivatives

d) About Currency Futures and trading in Currency Futures at ICICI Securities Ltd (I-Sec)

e) Interest Rate Future

f) Settlement Obligation in Currency Futures

g) Currency FuturePLUS Stop Loss

h) About Currency Option and trading in Currency Option at ICICI Securities Ltd (I-Sec)

i) Withheld Profit

j) Settlement Obligation in Currency Options

k) Specific FAQs on BSE

l) Specific FAQ on Exchange specified Clientwise limit

m) Charges

n) Contact Us

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a) Why Currency Derivatives?

1. What is Currency Derivatives?

The term 'Derivatives' indicates it derives its value from some underlying i.e. it has no independent value. Underlying can be securities, stock market index, commodities, bullion, currency or anything else. From Currency Derivatives market point of view, underlying would be the Currency Exchange rate. Derivatives are unique product, which helps in hedging the portfolio against the future risk. At the same time, derivatives are used constructively for arbitrage and speculation too.

2. What are the benefits of trading in Currency Derivatives

Currency Derivatives are very efficient risk management instruments and you can derive the below benefits:

i. Hedging: You can protect your foreign exchange exposure in business and hedge potential losses by taking appropriate positions in the same. For e.g. If you are an importer, and have USD payments to make at a future date, you can hedge your foreign exchange exposure by buying USDINR and fixing your pay out rate today. You would hedge if you were of the view that USDINR was going to depreciate. Similarly it would give hedging opportunities to Exporters to hedge their future receivables, Borrowers to hedge foreign currency (FCY) loans for interest and principal payments, Resident Indians, who can hedge their offshore investments.

ii. Speculation: You can speculate on the short term movement of the markets by using Currency Futures. For e.g. If you expect oil prices to rise and impact India's import bill, you would buy USDINR in expectation that the INR would depreciate. Alternatively if you believed that strong exports from the IT sector, combined with strong FII flows will translate to INR appreciation you would sell USDINR.

iii. Arbitrage: You can make profits by taking advantage of the exchange rates of the currency in different markets and different exchanges.

iv. Leverage: You can trade in the currency derivatives by just paying a % value called the margin amount instead of the full traded value.

3. What categories of Currency Derivatives contracts are offered for trading through ICICIdirect?

Future and Option contracts in Currency derivatives have been introduced in India. Trading in Currency derivatives through ICICIdirect is presently offered in both Future and Option contracts in NSE only.

4. What are Currency Futures Contracts?

Currency Futures contracts are legally binding agreement to buy or sell a financial instrument sometime in future at an agreed price. Currency Future contracts are standardized in terms of lots and delivery time. The only variable is the price, which is discovered by the market. Currency Futures contracts have different expiry validity and will expire after the completion of the specified tenure.

5. Who is eligible to trade in Currency Derivatives?

All Resident Indians as defined in section 2(v) of the Foreign Exchange Management Act, 1999 (FEMA, Act 42 of 1999) are eligible to trade in the Currency Derivatives segment. For participation by regulated entities, concurrence  from  respective  regulators should be obtained. Currently, trading facility in Currency Derivatives at I-Sec will be offered to all Resident Individuals / HUFs / eligible Corporates fulfilling the FEMA criteria.

 

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b) Account Opening

1. Do I need to open a new account for trading in Currency Derivatives?

(a) Existing Customers: No, if you are an existing customer and have a 3-in-1 ICICIdirect.com account and your linked ICICI Bank account is more than 6 months old you activate your account for Currency Derivatives Segment online by accepting the Online Terms and Conditions for Currency Derivative. If your linked ICICI Bank Account is not more than 6 months old you can activate your account for Currency Derivative Segment by submitting the prescribed documentation. To apply for Currency Derivatives please contact customer care at 24-hour Customer Care Number or you can also write to us at helpdesk@icicidirect.com We will be glad to assist you further.

(b) New Customers: Yes, all new customers need to apply for a 3-in-1 Account. The Account Opening Form already includes prescribed documentation for Currency Derivatives. For further information on how to open a 3-in-1 account, please feel free to contact any of our 24-hour Customer Care Number. you may also write to us at helpdesk@icicidirect.com We will be glad to assist you further.

2. Is an existing customer required to submit additional document(s) to begin trading in Currency Derivatives?

No, if you are an existing customer and have a 3-in-1 ICICIdirect.com account and your linked ICICI Bank account is more than 6 months old you activate your account for Currency Derivatives Segment online by accepting the Online Terms and Conditions for Currency Derivative. If your linked ICICI Bank Account is not more than 6 months old you can activate your account for Currency Derivative Segment by submitting the prescribed documentation.

3. What documents would I be required to submit for registering myself in for Currency Derivatives? Do I need to submit any proofs along with the documents?

(a) Existing customers: If your linked ICICI Bank account is more than 6 months old then you can activate your account for Currency Derivatives Segment online by accepting the Online Terms and Conditions for Currency Derivative

(b) New customers: If you are not already a registered customer of I-Sec, you will have to open a 3-in-1 account with I-Sec. The account opening documentation for the 3-in-1 form has been consolidated for all product offerings and contains the Currency Derivatives documentations also. Proof of identity and address, as prescribed, would be required to be submitted along with the new account opening form.

4. I am an existing customer why do I need to sign and submit additional documentation for trading in Currency Derivatives?

The additional documentation requirements have been specified by the regulators and as a broker ICICI Securities Ltd (I-Sec) needs to comply with these requirements.

5. How will I receive the intimation on registration for Currency Derivatives?

You will receive an e-mail once your form has been successfully processed and you are registered for Currency Derivatives. You will be required to accept the online Terms and conditions applicable to Currency Derivatives and you can immediately start trading.

 

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c) Trading in Currency Derivatives

1. How can I start trading in Currency Derivatives?

Once you are registered for Currency Derivatives after completing the below steps:
. Login into your account with your user id and password,
. Accept the online "Currency Derivatives Terms and Conditions" and
. Allocate funds from Modify Allocation link for Currency Derivatives segment

2. On which exchanges can I trade in Currency Derivatives at www.icicidirect.com?

ICICI Securities offers Currency Derivatives trading facility on the National Stock Exchange of India Ltd. (NSE).

3. What are the trading hours for Currency Derivatives?

Trading in Currency Derivatives through www.icicidirect.com is allowed during the exchange specified timings. Currently, the trading hours on NSE for Currency Derivatives are between 9:00 am to 05:00 pm, from Monday to Friday. The Exchanges may alter the trading hours on any day for any reason that the Exchanges may deem fit.

4. Can I place orders through the Call Centre?

Yes. You can place Currency Derivative orders through our Call Centre by using the Call N Trade facility.

5. Can I place overnight orders (orders outside market hours) in Currency Derivatives segment?

Yes. Overnight orders are allowed to be placed in Currency derivatives segment. Only Limit orders are permitted and such orders will be sent to the exchanges on the next trading day once the markets open.

6. What are different order types that are available in Currency Derivatives?

You have the following order types in Currency Derivatives:

. Day/Good Till Day orders: Day orders are orders which remain valid only for one trading session. Any unexecuted order pending at the end of the trading session is expired.
. Immediate or Cancel (IOC orders): IOC order allows the user to buy or sell a contract as soon as the order is released into the system, failing which the order is cancelled by the system. Partial match is possible for the order and the unmatched portion of the order is cancelled immediately.

 

d) About Currency Futures and trading in Currency Futures at ICICI Securities Ltd (I-Sec)
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1. What is Currency Futures Trading at ICICI Securities Ltd (I-Sec)?

As a customer of I-Sec, you can now trade in Currency Futures on NSE .

You can take buy/sell positions in eligible underlying currency contracts expiring in different months. If, during the course of the contract life, the exchange rate moves in your favor (rises in case you have a buy position or falls in case you have a sell position), you make a profit. In case the exchange rate movement is adverse, you incur a loss.

2. Which currency exchange rates are eligible for Currency Futures trading? Why is the stock list restricted to specific currencies exchange rates only?

I-Sec enables currencies for trading in the Currency Futures and Option segment. Only those currencies which are allowed by the exchanges are made available by I-Sec for currency Futures and Options trading. Currently, in Future USDINR, EURINR, GBPINR, JPYINR and in Option USDINR is permitted by the exchange and will be enabled by I-Sec for trading in Currency Futures and Option segment.

3. How is Currency Futures trading different from Equity Derivatives trading?

Equities Derivatives trading allows you to trade in Stocks and Index. While Currency Derivatives trading allow you to trade in currencies; currently in USDINR, EURINR, GBPINR, JPYINR in Future and USDINR in Option. Settlement in both the segments is presently done in cash.

4. How is the Currency Futures contract defined?

USDINR Future contract expiring on 27 Aug, 2009 is defined as "FUT-USDINR-27-Aug-2009". Wherein, "FUT" stands for Futures as currency derivatives product, "USDINR" for underlying currency exchange rate and "27-Aug-2009" for the expiry date.

5. What is an "Underlying" and how is it different than "Contract"?

A Currency exchange rate enabled for trading on futures is called an "Underlying" e.g. USDINR. There may be various tradable contracts for the same underlying based on its different expiration period. For example FUT-USDINR-27-Aug-2009, FUT-USDINR-28-Sep-2009 and FUT-USDINR-28-Oct-2009 are "contracts" available for trading in currency futures having USDINR Exchange rate as "underlying".

6. When do the Currency Futures contracts expire?

Currency Futures contracts expire two working days prior to the last business day (i.e. Last trading day at exchange) of the expiry month.

7. How do I place buy/sell order (s) in Currency Futures?

To place Buy/Sell orders in Currency Futures, you will have to do the following:

. Visit the "Place Order" page
. Define the Currency Underlying Code
. Select "Futures" in the "Product" drop down box
. Click on "Select the contract". This will display the whole list of contracts available in the given Currency code expiring in different months. 
. Select the contract in which you wish to trade
. Click on the "Buy / Sell" link. This will take you to the buy / sell page.
. Define the Order Type i.e. Market or Limit, order validity period eg. Day, Limit Price and Stop Loss Trigger Price if any.

8. Do I have to pay the full contract value on placing orders in Currency Futures?

No. You will be required to place a certain % of order value as margin, while placing a buy/sell position in Currency Futures. With Currency Futures trading, you can leverage on your trading limit by taking buy/sell positions much more than what you could have taken in the Spot market. However, the risk profile of your transactions goes up.

9. How much margin would be blocked on placing the Currency Futures order? How is margin blocked?

Initially, margin is blocked at the applicable margin percentage on the order value. For market orders, margin is blocked considering the order price as the last traded price of the contract. On execution of the order, the same is suitably adjusted as per the actual execution price of the market order. The margin is blocked from the available limits under the Currency Limit page.

10. Is the margin % uniform for all Currencies?

The margin % for currency is displayed on the site under the "Underlying List" page of Currency. Margin percentage may differ from currency to currency based on the liquidity and volatility of the respective currency exchange rates besides the general market conditions. But all future contracts within the same underlying currency would attract same margin %.

11. Can margin be changed during the life of contract?

Yes, margin % can be changed during the life of the contract depending on the volatility in the market. It may so happen that you have taken your position at 4% margin. But later on, due to the increased volatility in the exchange rates, the margin % is increased to 5%. In that scenario, you will have to allocate additional funds to continue with the open position, else such position may come in the MTM loop and get squared off because of insufficient margin. It is advisable to keep higher allocation to safeguard the open positions from being squared off.

12. Is margin blocked on all Currency future orders?

No. Margin is blocked only on such Currency Future orders, which result into increased risk exposure.

In case you have placed orders in a near month contract and the middle month contract of the same underlying, for calculating the margin at order level,value of all buy orders and sell orders (in the same underlying-group) are added. Margin is levied on the higher of two i.e. if sum of buy orders is higher than the sum of the sell order value, then all buy orders will be margined and vice versa.

In other words, margin is levied at the maximum marginable order value in the same underlying.

For example, you have placed the following buy and sell orders.

Contract Details Buy Orders Sell Orders
No. of Lots Qty Rate Order Value No. of Lots Qty Rate Order Value
FUT-USDINR-27-Aug-2009 1 1000 45 45000        
FUT-USDINR-28-Sep-2009 1 1000 49 49000 2 2000 52 104000
FUT-USDINR-28-Oct-2009         1 1000 40 40000
d) Total 2 2000    94000 3 3000   144000

As explained above, margin is levied on the higher of Buy and Sell Order value. In the above given example, Sell Order Value is greater than Buy Order Value. Hence margin would be levied at specified margin % on Rs. 144000.

13. What happens if buy or sell orders are placed when there is some open position already existing in the same underlying?

If you place a Buy/Sell orders in an Underlying, in which you already have an open position, margin will be levied as per the following calculations:

. First the Marginable buy/sell order lots will be calculated.

Marginable Buy Order = Buy Order at Underlying - Open Net Sell Position

Marginable Sell Order = Sell Order at Underlying - Open Net Buy Position

.Marginable buy / sell order value is then arrived as follows .

Marginable Buy / Sell Order Value = Buy / Sell weighted average price * Marginable Buy / Sell lots

. For Order Level margin, Marginable buy order value and Marginable sell order value would be compared and margin would be levied on higher of the two.

For example, in the above example there is an open sell position of 1 lot of 1000 qty " FUT-USDINR-27-Aug-2009". Marginable buy and sell order quantity would be 1 lot of 1000 qty and 3 lots of 3000 qty respectively. Marginable buy and sell order value would be Rs. 47000 and Rs. 144000 respectively.

14. How is the initial margin (IM) calculated on open position?

The same margin % as applicable for Orders will be levied at position level also. Position level margin is arrived by applying the IM% on the value of net open position.

For example, you have open buy position in FUT-USDINR-27-Aug-2009 for 1 lot of 1000 qty @ Rs.50 and IM % for USDINR is 5%. In that case, margin at position level would be 1 * 1000 * 50 * 5% = Rs.2500/-.

Benefit of calendar spread margin may also be available to you in case of spread position.

15. What is meant by calendar spread?

Calendar spread means risk off-setting positions in contracts expiring on different dates in the same underlying.

For example, you take Buy position for 2 lots of 2000 qty in FUT-USDINR-27-Aug-2009 @ Rs.50 and sell position for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 @ Rs.55. 1 lot of 1000 qty buy position in FUT-USDINR-27-Aug-2009 and 1 lot of 1000 qty sell position in FUT-USDINR-28-Sep-2009 form a spread against each other and hence are called "Spread Position". This spread position would be levied spread margin % for margin calculation instead of IM%. In this example, the balance 1 lot of 1000 qty buy position in FUT-USDINR-27-Aug-2009 would be non-spread position and would attract initial margin.

I-Sec may, at its discretion, allow Reduced Margin benefits on spread position. I-Sec may allow such benefit for the spread position between Near month and Middle month contracts only.

16. How is the margin calculation done in case of calendar spread?

Margin calculation on Calendar Spread is done by applying the Spread Margin % on the Spread Position Value and then adjusting the amount with the Spread Profit or Loss to arrive at spread margin. If the amount calculated as per the above calculations is a negative figure, spread margin would be "0".

Spread position value is calculated by multiplying the spread position quantity with the weighted average price of position in far month contract.

In the above mentioned example, margin position of 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 will be subjected to IM% and 1 lot of 1000 spread position quantity would attract spread margin %. However, you will be able to view only overall margin figure on the open position page.

Assuming IM and spread margin at 5% and 2% respectively, overall margin on the Spread position will be calculated as follows:

(a) Spread Margin = (Lot*qty per lot*rate*spread IM%) ± Spread Loss/Profit
Or
"0" whichever is Higher

Spread Loss/Profit = (Sell Price - Buy Price of the spread contracts) * No. of lots forming spread * Qty per lot
                                   = (55-50) * 1 *1000 = 5000 Profit

Spread Margin = (1*1000*55*2%) - 5000) or "0" (Whichever is higher)

Spread Margin = Rs (- 3900) or 0 (Whichever is higher)

Spread Margin = 0

(b) Non-Spread Margin

1*1000*50*5%

Rs. 2500

(c) Overall Margin

a+b

Rs. 2500

17. Can spread position be formed among all the contracts in existence?

I-Sec would decide the contracts, which can form spread positions against each other. Only those contracts, which meet the criteria on liquidity and volume will be considered for spread positions. Technically, the currency exchange rates having low impact cost are included in spread definition. Margin is calculated and displayed separate for spread and non-spread contracts.

Let's assume that FUT-USDINR-27-Aug-2009 and FUT-USDINR-28-Sep-2009 are included in spread definition and FUT-USDINR-28-Oct-2009 is kept out of spread definition. If you take buy position for 2 lots of 2000 qty in FUT-USDINR-27-Aug-2009 and sell position for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009, 1 lot of 1000 qty buy position and 1 lot of 1000 qty sell position would form spread. If you take buy position for 2 lots of 2000 qty in FUT-USDINR-28-Sep-2009 and sell position for 1 lot of 1000 qty in FUT-USDINR-28-Oct-2009, it will not form spread and margin at IM% would be levied on both 2 lots (2000 qty) buy and 1 lot (1000 qty) sell position.

Similarly at order level, if you place buy order for 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 and sell order for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009, order having larger value would be margined. If you place buy order for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 and sell order for 1 lot of 1000 qty in FUT-USDINR-28-Oct-2009, both buy order and sell order would be margined at IM% as they would not form spread.

Contracts will be removed from the spread benefit 1 working day prior to the expiry of the near month contract.

At this stage the client will have to provide complete margin required on the positions taken in the near month contract (expiring one) as if it were not a contract forming a spread position. If limit is found insufficient to cover the enhanced margin amount, then the position may come into the intra day MTM loop and may get squared off due to margin shortfall.

18. What is meant by 'squaring off ' a position? What is a cover order?

Squaring off a position means closing out a Currency Future position.

The order placed for squaring off an open position is called a cover order.

For example, if you have currency futures buy position of 5 lots of 5000 qty USDINR expiring on 27th Aug 2009, squaring off this position would mean taking sell position in 5 lots of 5000 qty USDINR expiring on 27th Aug 2009 on or prior to 27th Aug 2009.

19. How do I place a square off order to close my open positions?

You can place the square off order either through the normal buy/sell page or through a hyper link "Square off" provided on the "Open Position" page.

20. Can an underlying be disabled from trading during the day?

I-Sec may, at its sole discretion, disable any particular underlying during the day from further trading under the facility.

21. Can I square off the open positions in the disabled underlying?

Yes, you can square off the open positions in the disabled underlying through square off link available on open position page.

22. I have placed the square off order. Can I modify that order?

Yes. You can modify the square off order until it is not fully executed.

23. How is the profit or loss recognized on execution of square off (cover) orders?

Profit/Loss on execution of square off orders is calculated by comparing the execution price of cover order with:

. The weighted average price at which the position was built up in case the position was built during the day

. The previous trading day EOD MTM price (as shown in the "Open Positions - Futures" table) in case the position has been carried forward from the previous day.

For example, say you have a futures position - 'Buy 2 lots of 2000 qty USDINR' in contract FUT-USDINR-27-Aug-2009 at an average price of Rs. 50 created through the execution of two orders - 'Buy 1lot of 1000 qty @ Rs. 48 ' and 'Buy 1 lot of 1000 qty @ Rs. 52'. If you square off a part of the position by selling 1 lot of 1000 USDINR @ Rs. 53, the profit on such square off would be calculated as:

Quantity squared off * (Execution price of Square off transaction - Weighted Average Buy price of the position)

1*1000 * (53 - 50) = 3000

24. How can I square off an open position which is part of spread position when I do not have enough trading limits to place a cover order?

In case you have a Spread Position and wish to square off the positions, you will be allowed to place cover orders independently for each position one by one only if you have sufficient margin to meet the Initial margin requirements of the position which remains open after one of the position has been squared off.

In case you do not sufficient margin as required above, you will have to square off both Buy as well Sell position that are forming spread position. Facility to place such an orders is available in Open Positions page against the respective net position at underlying - group level in the form of a link called "Joint square off". This joint square off link is different than square off link available against each contract position. On clicking the same, position in all contracts within spread definition would be displayed. You can then specify the quantity for any two positions. One has to be buy and other should be sell. Your square off orders will be placed at Market Rates.

25. When do you release the margins blocked on Currency Future positions?

Margins blocked on a position are released only after the Currency Future positions are squared off.

Net amount, after considering the following, is released:
. Margin blocked on Positions
. + Add margin
. +/- Profit/Loss incurred on Square off
. - Applicable taxes.

26. How does my limit get impacted whenever a buy/sell order is executed?

If the Buy/sell order placed by you is a fresh order (i.e. an order which would result into building up an open position), on execution of the order, the margin blocked at the time of order placement gets appropriately adjusted for the difference, if any, in the order price at which the margin was blocked and the execution price. Accordingly the limits are adjusted for differential margin.

If the Buy/sell order placed by you is a cover order (order which would result into square off of an existing open position), on execution of the order, your Limits would be adjusted for the following:

. Release of margin blocked on the open position so squared up
. +/- Profit/Loss incurred on Square off
. - Applicable taxes.

If the Buy/Sell order placed by you results into building a spread position, on execution of the order, your Limits would be increased with the amount of differential margin released.

For example, you are taking an open buy position for 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 @ Rs 50 and IM is 5%. Rs 2500/- would be blocked as an initial margin. Thereafter, you take a sell position for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 @ Rs 55 and spread margin is 2%. Hence the execution of FUT-USDINR-28-Sep-2009 order is resulting into spread position. As explained above, margin required would be max(0, (1*1000*55*2% - (55-50)*1*1000)) = Max(0,(1100 - 5000)) = 0. Hence the excess margin of Rs 2500/- (2500-0) would be released and added into your currency trading limits.

Continuing the above example, if you place a sell order for 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 @ 51, margin of Rs. 2550/- would be required to place this order. This margin would be required despite being a cover order to square off the open position in the same contract. Reason for the same is that the order now being placed by you would result into the increased risk exposure since the buy position of 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 has already been considered as position building up spread position. If buy position of 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 is squared off, sell position of 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 @ Rs 55 would become non-spread position and subjected to margin at 5 % IM.

27. How can I view my open positions in Currency Futures?

You can view all your open Futures positions by clicking on "Open Positions" and thereafter selecting "Futures" as product. The futures positions table gives details such as underlying, contract details, buy/sell position, Lots (no. of contracts), quantity, Buy order lots, Sell order lots, Base price, Last Traded Price (LTP), total margin blocked on open position and order level margin at underlying-group level. Positions in contracts forming spread and non-spread are shown in separate groups. Contracts forming part of the same group will form spread against each other.

28. What is Intra -Day Mark to Market? How does I-Sec call for additional margin during the Intra-day MTM process?

Once the Available Margin falls below the Minimum Margin, I-Sec may, at its discretion and at a suitable time, run the Intra-day Mark to Market process. Through this process, the system would block additional margin required out of the Limits available, if any.

In case there are no Limits available, the Intra-day Mark to Market process would cancel all pending orders for the underlying group and if still there is additional margin required, the process would square off the positions for which Available Margin is below the Minimum Margin and there exists a margin shortfall.

29. What is meant by Minimum Margin?

Minimum Margin is the margin amount on a particular position that you should ensure to maintain with I-Sec at all points in time. If the Available Margin with us goes below the required Minimum Margin, the I-Sec system would block additional margin required, if the same is available in the Limits.

30. How do you calculate available margin?

Available margin is calculated by deducting real time MTM loss from margin blocked and add margin at position level, i.e.

Available Margin = Margin on Positions + Add Margin - MTM Loss

31. How do you calculate Minimum Margin?

Minimum Margin is calculated by taking MM % instead of IM%. For spread position, Spread minimum margin % would be applied.

32. How do you calculate Additional Margin required when the Available Margin is below the Minimum Margin required?

In such a case, margin required on an executed position is re-calculated by taking Current Market Price (CMP) of respective position and IM % or spread margin % as the case may be. Available margin as calculated above is then compared with the required margin and amount for Additional Margin amount is arrived at.

For example say you have bought 1 lot of 1000 qty of FUT-USDINR-27-Aug-2009 at Rs.50 and IM is 5% and minimum margin is 3%. You would be having a margin of Rs.2500 blocked on this position. The last traded price (LTP) is now say Rs.48. This means the effective available margin Rs. 500/- which is less than the minimum margin of Rs 1500/- and hence additional margin to be called in for. Additional margin to be calculated as follows:

(a) Margin available
 
Rs.2500
(b) Less : MTM Loss
    (50-48)*1000
 
Rs.2000
(c) Effective available margin
    (a-b)
 
Rs.500
(d) Minimum Margin (always at Base Price*)
     1000*50*3%
 
Rs.1500
(e) Revised margin (always at LTP)
    1000*48*5%
 
Rs. 2400
Additional margin Call (e-c) Rs. 1900

* Base Price: During the day it is the Weighted average price of the transactions and if it is a carried forward position then previous trading days settlement price becomes next trading days base price which gets adjusted with further transactions on next trading day to arrive at the weighted average price.

33. How do I check if there is a margin shortfall on any open position?

If available margin on any open position has fallen below minimum margin required on that position, then available margin amount on such position would be highlighted in red colour on the Open Positions page indicating that the position may be squared off in the Intraday MTM process, if additional margin is not allocated.This shall be considered as a margin call on that position.You are advised to allocate additional margin immediately to meet the margin shortfall else such position may be squared off by I-Sec.

Further, please note that the Open Positions page does not refresh automatically. You need to frequently refresh the page by clicking on 'View' button to view latest details.

34. How do you call for Additional Margin during the Intra-day MTM process?

Once the available margin falls below the minimum margin required, our system would block Additional Margin required out of the limits available, if any.

35. What happens if limits are not sufficient to meet the Additional Margin requirements?

Our risk monitoring system/team may, at its discretion, place a square off order at market rate to close the open position. However, before placing the square off order all pending currency Futures orders in that underlying-group (contracts having same underlying and recognized in the same group for spread recognition) are cancelled by our risk monitoring system/team. Following is the sequence of actions taken by our risk monitoring system/team.

1. Cancel all pending Futures orders in that underlying-group and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else go to step (2).

2. Square off one-one Lot size (i.e. one lot at a time) of the near month contract in that underlying group and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else go to step (3).

3. Square off one-one Lot size of the next month contract in that underlying group and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else carry on the process in the same way till all the positions in that underlying group are totally squared off.

However, it is clarified that if, for any reason, the risk monitoring system/team does not square off the open position even in a situation where the limits are not sufficient to meet additional margin requirements, it is ultimately the customer's responsibility to square off the open position on his own, to limit his losses.

Once a position has been created by the customer, he is solely responsible for the profits or losses emanating from such position. I-Sec is under no obligation to compulsorily square off any open position and in no circumstances, can be held responsible for not squaring off open positions or for resulting losses therefrom.

36. What happens if the limit is insufficient to meet a margin call but there are unallocated clear funds available in the bank account?

While making an online check for available Additional Margin, our system would restrict itself only to the extent of Currency trading limit (i.e. Allocation) and would not absorb any amount out of un-allocated funds lying in your linked bank account. This is done so as to keep your normal banking operations undisturbed. It is, therefore, advisable to have adequate surplus funds allocated for Currency trading when you have open positions.

However, I-Sec reserves the right to block and/or debit even unallocated clear funds available in the bank account.

37. Can I do anything to safeguard the positions from being squared off during Intra-day MTM process?

Yes, you can always voluntarily Add Margin at the time of placing orders or allocate additional margin, on any open position from the open positions page.

Since the Intra-Day MTM process is triggered when Available Margin is less than the minimum margin required, having adequate margins can avoid calls for any additional margin in case the market turns unfavorably volatile with respect to your position.

You can add margin to your position either at the time of placing orders or once the position is created by clicking on "Modify Margin" link and then do Add margin on the "Open Position - Futures" page by specifying the margin amount to be allocated further. However, you should keep in mind that whatever margin you add during the day will remain there only till the end of day mark to Market (EOD MTM) is run or upto the time you square off your position in that underlying group completely. Next day if you want some more margin to be added towards the same open position, you will have to do a 'Add Margin' again.

38. In case of profit on a Future position or where the Available Margin is in excess of the Margin Required, can I reduce the margin against the position to increase my limit?

Yes, you can reduce and release margin against the underlying position to increase your limit but only to the extent of any excess margin compared to that of required margin (in case of profitable positions) by accessing he 'Reduce' option given in the 'Modify Margin' link under the actions column on the open position page. In case the position in the underlying group is completely squared off then the margin along with add margin amount will be automatically released by the system.

39. How can I calculate the amount of excess margin that can be Reduced from my blocked margin to increase my limits for currency trading?

Excess margin that can be reduced is "Add margin or difference between the "Blocked margin" and the "Total required margin", whichever is less.

Blocked Margin = Margin on position + Add margin, if any

Total required margin is 'current required margin' plus the notional 'mark to market (MTM) loss' amount, if any.

Current Required margin is the margin calculated at the LTP or the blocked margin on position, whichever is higher

Benefit for Notional/unrealized profit is not netted off while calculating Required Margin.
Reduce = Lesser of :
"Add margin" OR " Blocked Margin - Total Required Margin"

i.e. Reduce = Min(Max(0,((Margin on position +Add Margin) - Total required margin)), Add margin)

Total Margin Required = Current Margin Required + Add MTM Loss

Current Margin Required = Max (Margin on Base Price of Position, Margin at LTP)

Reduce margin amount is calculated with the help of below example:
1. There is buy position with Margin on position 700, Add margin 200, Loss 100, Margin at LTP 590, Required margin on base price of position 700
a. Current Margin required = Max(700, 590) = 700
b. Total Margin required = 700 + 100 = 800
c. Reduce Margin = Lesser of "200" or Max(0,((700 + 200) - 800)) = 100

2. There is a sell position with Margin on position 700, Add margin 200, Loss 100, Margin at LTP 790, Required margin on base price of position 700
a. Current Margin required = Max(700,790) = 790
b. Total Margin required = 790 + 100 = 890
c. Reduce Margin =Lesser of 200 or Max(0,((700+200) - 890))= 10

3. There is sell position with Margin on Position 4900, Add Margin 500, Profit 1000, Margin at LTP 9700, Required margin at base price 9800
a. Current Margin required =Max(9800,9700) = 9800
b. Total Margin required = 9800+0* =9800
*Profit are ignored from calculations
c. Reduce Margin = Lesser of 500 or Max(0,((4900+500)-9800)) = 0

40. What is meant by EOD MTM (End of Day - Mark To Market) process?

Daily EOD MTM is a mandatory feature of Currency futures Settlement Process. Every day the settlement of open Currency futures position takes place at the Settlement Price declared by the exchanges for that day.

The Base price as shown in the Open Position - Futures page is compared with the Settlement price and difference is cash settled. In case of profit/loss in EOD MTM, Limits are increased/reduced by the amount of profit/loss ; net of applicable brokerage, taxes, statutory levies. The position is carried forward to the Next day at the previous trading day's Settlement price at which last EOD MTM was run.

Settlement price for all the contracts are provided by exchange after making necessary adjustment for abnormal price fluctuations. It is different than LTP.

41. Would there be any impact on the margin blocked at position level due to EOD MTM?

Yes, EOD MTM does have its impact on margin at position level. During the EOD MTM, margin is re-calculated at the Settlement price for the day and differential margin is blocked or released as the case may be. For margin calculation, the present IM% and spread margin % is taken.

To provide sufficient margin on open position after EOD MTM, ensure that sufficient allocation is available for trading in the Currency segment. You must visit the allocation amount for Currency on daily basis and allocate further if present allocation is found insufficient.

Due to daily MTM and payin/payout, allocation amount for Currency may come down over a period of time and because of the same, open positions may fall in Intra-Day MTM loop and may get squared off unless you allocate fresh amount for Currency trading. Payin amount is debited first from the allocation you make for Currency and then from the free unallocated bank balance. However, Payout credit is given to the linked bank account and the same is allocated for further trading. Limits will therefore be increased by the amount of profit, net of applicable taxes, brokerage and statutory levies.

42. What is meant by "Split of Contract"?

One working day prior to the expiry of contract, all open positions forming a spread position in that contract would be taken out of spread definition and subjected to normal IM margin %. Position in such separated contracts would be shown separately. Limits would be reduced appropriately to ensure that IM% on near month contract is also collected. If limits are falling short to provide the same, the margin available in a group from which the near month contract was moved will also be utilized to make good the short fall. After moving the near month contract from the existing group to separate group, margin for the existing group will be re-calculated after considering spread positions in the new Middle month contracts and limits would be adjusted appropriately.

For example, you take buy position for 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 @ Rs.50 and sell position for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 @ Rs.49. 1 lot of 1000 qty buy position and 1 lot of 1000 qty sell position would form spread. At 2% spread margin, margin blocked is Max(0, ((1*1000*55*2%)-((49-50)*1*1000))) Rs. 2100/-. IM is 5%. Now position in FUT-USDINR-27-Aug-2009 is taken out of spread. Following would be the margin requirement.
  

a.Limits
 
Rs. 20000
b.Margin on FUT-USDINR-27-Aug-2009 - Group A
  1*1000*50*5%
 
Rs. 2500
c.Remaining limits
  (a-b)
 
Rs. 17500
d.Margin on FUT-USDINR-28-Sep-2009 - Group B
  1*1000*49*5%
 
Rs. 2450
e.Remaining limits
  (c)-(d - 2100)
 
Rs. 17150

43. Can a non- spread contract be moved to spread group?

Yes, on the expiry of near month contract, far month contract would become the Middle month contract and would be moved to the spread group. Other contracts along with the New contract introduced will now be non-spread contracts, being the Far and beyond far month contracts for the new trading cycle.

44. Is it compulsory to square off the position within the life of contract?

No. You need not square off your position till the contract expires. In that case, I-Sec as well as Exchange would expire your position on the last day of the contract expiry after running the EOD MTM. Your position would be closed at the final settlement price as per the current regulations. The Final Settlement price shall be the Reserve Bank Reference Rate on the last trading day of such currency derivative contract, or as may be specified by the relevant authority from time to time. Margin blocked on such expired position will also be released and added into your trading limits after adjusting profit/loss, applicable brokerage, taxes and statutory levies on close out.

45. Does the I-Sec system identify trading strategies and provide hedging benefit between different contracts within Currency Futures underlying?

No. I-Sec does not provide margining benefits on Portfolio or Strategy level. Margins will be blocked on the individual positions as per logics defined above, irrespective of whether they form a part of any trading strategy or no. Also square off of positions would be done in the manner as detailed in the FAQs above. This might lead to squaring off of  positions that form part of any currency derivative strategy in your portfolio. I-Sec will not analyze your portfolio while squaring off positions due to margin shortfall. The square off would happen purely at individual position levels and not at portfolio/strategy level.

Also spread formation and benefit will be at the discretion of I-Sec.

46. Is there any hedging benefit between Currency Futures and Options?

No. Currently ICICIdirect is not offering any hedging benefit between Currency Futures and Currency Options. Hence customers are advised to monitor all the positions as independent positions and allocate margin for all individual open positions (if additional margin is required).

47. What is Reference Price and Exchange Trade Price execution Range for Futures Contracts?

In order to promote orderly trading, Exchange has prescribed Reference price and Execution range for Currency Futures and Options contracts. Orders shall be matched and trades shall take place only if the trade price is within the Trade Execution range based on reference price of the contract.

The reference price for each contract shall be the theoretical price based on the underlying price at market open, and during trade, it would be the simple average of trade prices of that contract in the last three minutes. For contracts that have traded in the last three minutes, the reference price shall be revised throughout the day on a rolling basis at one minute intervals. For other contracts, the reference price shall be the theoretical price based on the latest available underlying price and shall be revised throughout the day at regular intervals.

If any order which is within the operating range but which may result in a trade outside the execution range is entered then such an order (full or partial as the case may be) shall be cancelled by the Exchange

Execution Range for Future Contracts

The execution range for future contracts with Tenure upto 6 months would be 1% around the reference price.
The execution range for future contracts with Tenure greater than 6 months would be 2% around the reference price.

48. If the Fresh/Cover order gets canceled by Exchange, will I be able to place the order once again in the same underlying and contract?

Yes. But the order entered should be such that it lies within the reference price and also the trade execution occurs within the execution range. If these criteria are not met then the order will be fully/partly cancelled by the exchange.

49. Can my Fresh/Cover order get part canceled by the Exchange?

Yes. Your Fresh/Cover order can get part canceled by the Exchange if part of the ordered quantity tries to match part opposite order whose price is not within the Trade Price execution Range. Assume you place a buy fresh order of 2000 quantity at a limit price of 62/-. At the time of Execution of Buy Order, there are two opposite orders finding match of 1000 quantity each at Rs 61/- and 60/-, respectively. The Trade price Execution Range at that point is Rs 58-60. Such order will be partly canceled (Quantity 1000 at Rs 61/-) and partly executed (Quantity 1000 at Rs 60/-) by Exchange.

 

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e) What is Interest Rate Future?

1. What is Interest Rate Future?

Interest Rate Futures are standardized interest rate derivative contract to buy and sell a notional security or any other interest bearing instrument at a specified future date, at a price determined at the time of the contract.

2. Which Interest Rate Future contracts are introduced for trading on ICICIDirect.com?

Interest Rate Futures Contracts are based on the list of underlying as may be specified by the Exchange and approved by SEBI from time to time.

3. Where can I view futures contracts and underlying for trading in Interest Rate Futures?

You can view underlyings for Interest Rate Futures (FUTIRC) contracts on 'Underlying List' page and contracts can be selected either through the 'Place order' link by entering the underlying name or by clicking on underlying name through 'Underlying List' page under Currency segment.

4. Will there be separate market hours to trade in IRF contracts on Currency Derivatives?

No, you can trade in Interest Rate Future(IRF) contracts during current Currency derivative market trading hours (Monday to Friday 9:00 A.M. To 05:00 P.M.) only.

5. What is the Expiry Day for the Interest rate Future contracts traded in Currency Derivatives?

Expiry Date will be the last Thursday of the month. In case the last Thursday is a trading holiday, the previous trading day shall be the expiry/last trading day. The FUTIRC contracts shall expire at the normal market closing time on the expiry day or such other time as decided by Exchange.

6. How much margin would be blocked on placing the Interest Rate Futures order?

Initially, margin is blocked at the applicable margin percentage of the order value. For market orders, margin is blocked considering the order price as the last traded price of the contract. On execution, the same is suitably adjusted as per the actual execution price of the market order. The initial margin percentage can be checked from the "Underlying List" link under the Currency trading segment. You can check the margin required to create your position from "Know Your Margin" link under Currency trading segment.

7. Can margin % be revised during the life of the contract?

Yes, margin % can be revised during the life of the contract depending on the volatility in the market. It may so happen that you have taken your position at 4% margin. But later on, due to the increased volatility in the exchange rates, the margin % is increased to 5%. In that scenario, you will have to allocate additional funds to continue with the open position, else such position may come in the MTM loop and get squared off because of insufficient margin. It is advisable to keep higher allocation to safeguard the open positions from being squared off.

8. Is margin blocked on all Interest Rate Future orders?

No. Margin is blocked only on such Interest Rate Future orders, which result into increased risk exposure.

In case you have placed orders in a Near month contract and the middle month contract of the same underlying, for calculating the margin at order level, value of all buy orders and sell orders (in the same underlying-group) are added. Margin is levied on the higher of two i.e. if sum of buy order value is higher than the sum of the sell order value, all buy orders will be margined and vice versa.

In other words, margin is levied at the maximum order value in the same underlying.

For example, you have placed the following buy and sell orders.

Contract Details Buy Orders Sell Orders
No. of Lots Qty Rate Order Value No. of Lots Qty Rate Order Value
FUT-883GS2023-23-Apr-2014 1 2000 62 124000        
FUT-883GS2023-29-May-2014 1 2000 65 130000 2 200 62 248000
FUT-883GS2023-26-Jun-2014         1 2000 60 120000
Total 2 4000   254000 3 6000   368000
As explained above, margin is levied on the higher of Buy or Sell Order value. In the above given example, Sell Order Value is greater than Buy Order Value. Hence margin would be levied at specified margin % on Rs. 368000.

9. What would be the brokerage payable on Interest Rate Future trades?

The brokerage for Interest Rate Future trades would be the normal brokerage charged currently on similar lines to that of existing Currency Derivative trades based on your existing brokerage plan selected by you. You can refer the brokerage schedule on our website www.icicidirect.com on the path Customer service page>Important Information>Brokerage.

To know more about order placement, square off, margin calculation, spread benefits, MTM etc in Interest Rate Futures (IRF), please click here and refer to the FAQs available which are similar to currency derivatives.

 

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f) Settlement Obligation in Futures

1. What kind of Settlement obligation will I have in Currency futures?

You can have following two Settlement obligations in Currency futures market:

i. Daily Settlement Obligations:

Daily settlement obligations arise due to the following:
. PayOut/PayIn due to Profit and loss on squared off position
. PayOut/PayIn due to Profit and loss on EOD MTM of open position
. PayIn due to Brokerage and statutory levies
. PayIn due to applicable Taxes

ii. Final Settlement Obligations:

. PayOut/PayIn due to Profit and loss on close out
. PayIn due to Brokerage and statutory levies on close out
.  PayIn due to applicable Taxes

2. Where can I see my Settlement obligation?

You can view your obligations on the "Cash Projections" page. The date on which amount will be debited from your account or deposited in your account can be checked from the 'Cash Projection' page. You can even see the historical obligation (already settled) by giving the respective transaction date.

3. When is the obligation amount debited or credited in my bank account?

All Currency futures Daily obligations are settled by exchange on T+1 basis and Final settlement obligations are settled by exchange on T+2 basis.

Daily Settlement Obligations at I-Sec: This means that any daily obligation arising out of transactions in futures or EOD MTM on day (T) is settled on the immediate next trading day. This further means that if you have a debit obligation on day (T), the payment will have to be made on day (T) itself. Whereas, if you have a credit obligation, amount would be credited in your account on T+1 day. If T+1 day is a holiday, credit would be given to your account on the next working day.

Final Settlement Obligations at I-Sec: Your final settlement obligation will be settled in the same manner as the daily obligations except that your credit obligation will be credited to your account on T+2 day or on a subsequent working day, if T+2 is a holiday.

4. On T+1 day I have payout for a particular trade date and also payin for different trade date? Will payout and payin run separately ?

No, if different payin and payout are falling on the same day, amount would be first internally adjusted against each other and only net amount would either be recovered or paid. In cash projection, distinct particulars would be given for payin/payout internally settled and settled by way of debit/credit in bank and setting Trading Limits.

5. I have allocated funds for secondary market- Equity and F&O. Can I make use of those limits for Currency market also?

Allocation has to be done separately for Equity, Equity Derivatives (F&O) and Currency market. If you have allocated some funds for Equity and F&O, you will get corresponding trading limits only in these products separately. For trading limits in Currency, you will have to make necessary allocation separately under the Currency segment on the "Modify Allocation" page.

 

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g) Currency FuturePLUS Stop Loss

. What is FuturePLUS Stop Loss (i.e. With Cover SLTP Order)?

FuturePLUS Stop Loss (i.e. With Cover SLTP Order) is an intra day product having an order placement feature wherein you place two orders simultaneously wherein Fresh order will be a market/Limit order and with the second order you limit your loss on every position by necessarily placing a cover order specifying the Stop Loss Trigger Price (SLTP) and a Limit Price.
Since the FuturePLUS Stop Loss position gives a clear view of maximum downside involved in a particular position, ICICI Securities Limited (I-Sec) would block margin required for FuturePLUS Stop Loss product or maximum loss on that position, whichever is higher. ICICI Securities at its discretion may charge higher margin if it deems appropriate.

. What is fresh order?

The order which is placed for creating the position is called fresh order. The fresh order can be either a Market or a Limit order.

. Can I place a limit fresh order?

Yes, fresh order can be placed as a Limit order.

. What is a cover order?

The fresh order as defined above on execution creates an open position in Currency FuturePLUS Stop Loss product. The cover order is an opposite order taken by you to close your open position. Assuming you have taken a buy position, your cover order will naturally be a sell order. The cover order will compulsorily have to be a Cover SLTP (Stop Loss) order.

. Can I place a cover profit order?

No, currently this feature is not available in Currency FuturePLUS Stop Loss product.

. Can I place Stop Loss order after the Fresh position is taken?

No. You will need to compulsorily place Stop Loss order along with your Fresh order. In Currency FuturePLUS Stop Loss product you will not be allowed to place the Stop Loss order after placing the fresh order.

. Can I place Currency FuturePLUS Stop Loss orders in all contracts?

Only select contracts have been enabled for trading under the Currency FuturePLUS Stop Loss product. Only those contracts, which meet the criteria on liquidity and volume have been enabled for trading under this product.
I-Sec reserves the right to select the contracts for Currency FuturePLUS Stop Loss product and may, at its sole discretion, include or exclude any contract for trading in this product without any prior intimation.

. From where do I place FuturePLUS Stop Loss orders?

You can place orders in Currency FuturePLUS Stop Loss product by visiting the existing 'Place Order' with product type as 'FuturePLUS Stop Loss' under the Currency trading section. In case this selection is done then both Fresh and Cover SLTP orders can be placed simultaneously from the same page.

. What is a Cover Stop Loss order?

A Cover Stop loss order allows you to place an order which is sent to the Exchange alongwith fresh order but gets activated and is triggered only when the market price of the relevant underlying reaches or crosses a trigger price specified by you in the form of 'Stop Loss Trigger Price'. When a Stop Loss Trigger Price (SLTP) is specified in a limit order, the order remains passive (i.e. not eligible for execution) till the price of the underlying crosses the specified SLTP. Once the last traded price of the underlying reaches or surpasses the SLTP, the order becomes activated (i.e. eligible for execution at the exchange) and once triggered behaves like a normal limit order. It is used as a tool to limit the loss on a position.

Examples:
Cover Stop Loss Buy Order
'A' takes a short (sell) position in underlying USDINR at Rs. 70 in expectation that the price will fall. However, in the event the price rises above his sell price 'A' would like to limit his losses. 'A' may place a limit buy order specifying a Stop loss trigger price of Rs.71 and a limit price of Rs. 72. The stop loss trigger price (SLTP) has to be between the last traded price/fresh sell limit price (as the case may be) and the buy limit price. Once the market price of underlying USDINR touches or crosses the SLTP i.e. Rs. 71, the order gets converted to a limit buy order at Rs. 72.

Cover Stop Loss Sell Order
'A' takes a long (buy) position in underlying USDINR at Rs. 70 in expectation that the price will rise. However, in the event the price falls, 'A' would like to limit his losses. 'A' may place a limit sell order specifying a Stop loss trigger price of Rs. 69 and a limit price of Rs. 68. The stop loss trigger price has to be between the sell limit price and the last traded price/ fresh buy limit price (as the case may be) at the time of placing the stop loss order. Once the last traded price touches or crosses Rs. 69, the order gets converted into a limit sell order at Rs. 68.

Important
Please note that in a fresh buy order, the Sell SLTP should be a price lower than the buy limit price (in case of fresh buy limit order) and last traded price ( in case of both market and limit order). An SLTP cannot be placed for a price that has already been surpassed by the market when the SLTP is being placed. Similarly, in case of fresh sell order, the buy SLTP should be greater than the sell limit price of fresh order (in case of Sell fresh limit Order) and last traded price (in case of both market and limit order).

. What are the details required to be given to place a fresh order?

Following details should be provided to place a fresh order:
1. Underlying
2. Contract Details
3. Action (Buy/Sell)
4. Quantity in Lots i.e. Number of Contracts
5. Order Type - Market/Limit
6. Limit Price (if order type selected as Limit)

. Are the fresh orders and cover SLTP orders to be placed together?

Yes, the fresh and cover orders under FuturePLUS Stop Loss product are to be placed together.

. Should the quantity in lots be the same for fresh and cover SLTP order?

Yes, the quantity in lots will be same for fresh and cover SLTP order.

. What are the details for a cover SLTP order?

The details for a cover SLTP order are as follows:
1. Exchange
2. Contract Details
3. Action (Buy/Sell)
4. Quantity in Lots i.e. Number of Contracts
5. Order Type - Limit
6. Stop Loss Trigger Price
7. Limit Price
The first 4 values would be automatically picked up from the Fresh order details. The Stop Loss Trigger Price value is required to be entered by you which would be the trigger price and the order gets activated once the market price of the relevant security reaches or crosses this threshold price. The value for limit price would automatically appear in the Limit Price field based on the SLTP minimum difference % for the underlying between the Limit Price compared to the Stop Loss Trigger Price (SLTP)

. Can I cancel only cover SLTP order?

No, only cover SLTP order cannot be cancelled. However, only in cases where your fresh order gets cancelled/rejected then you shall be given a link/tool to Cancel your cover SLTP order from Order Book.

. Can I modify the fresh order?

Yes, you can modify order type and Limit price of your fresh order from order book if your fresh order is pending for execution or partially executed and cover order is also pending for execution. You can modify the fresh limit order to a Market order.

. Can I modify the cover SLTP order?

Yes, you can modify the price of your cover SLTP order subject to the Trigger price conditions being fulfilled. You can even modify the Cover SLTP order to a Market order provided your fresh order is full executed.

Assume you take a buy position for the fresh order in USDINR of 1 lot (1 lot = 1000 quantity) at current market price of 70/-. Simultaneously, you also place the sell (cover SLTP) order of 1 lot (1 lot = 1000 quantity) at Limit price 68.8050/- and SLTP 69.50/-. The above trigger condition is defined with a view to curtail losses. If subsequently the current market price shoots up to 71/-. You can modify the order as below Limit price 70.1910/- SLTP 70.90/- (i.e. SLTP can be placed upto 71) or alternatively you can modify the order to market and book profits.

. What is the quantity that can be submitted for fresh orders?

The maximum quantity that can be submitted for fresh orders is the total of best 5 Bid/Offer quantities that is available in the best bids and offers for all underlyings. If the quantity that you input is greater than the quantity available in the best 5 bids and offers then the order will not go through for any underlying.

For fresh limit order, the maximum quantity that can be submitted for fresh orders is generally the maximum quantity allowed for order placement by the exchange. However I-Sec reserves the right to modify this permissible maximum quantity based on the risk factors.

Assuming that you want to place a buy order in FUT-USDINR-26-Feb-2019 for 30 lot (1 lot = 1000 quantity) @ 70, and the first 5 offer quantity available for the buy order are as under:

Best Offer Lots Best Offer Price
1 70.0550
10 70.1000
3 70.1500
12 70.2500
2 70.2575


In the above scenario, the first 5 Offer quantity available is 28 lots and since the buy order quantity placed is 30 lots which exceeds the best 5 offer quantity, it would be rejected by the system in case of fresh market order. Similar would be the case for Fresh Sell market order, wherein if the total sell qty is greater than the sum of first 5 Bid quantity available then it would be rejected by the system. The maximum order qty for fresh market order to be placed should be equal to the first 5 best bid/offer quantity available at that point of time.

. What will be the price at which margin for an order will be calculated?

For all other underlyings, for fresh market orders the price would be calculated as the weighted average price of the best 5 bids and offers available upto the order quantity for calculating the margin requirement. If the following offers are available in the best 5 bids and offers and the client places a Buy order for quantity of 60.

Best Bid lots Best Bid Price Best Offer Lots Best offer Price
15 70.7500 15 71.0000
15 70.5000 5 71.5000
35 70.2575 32 72.0000
50 70.2000 40 72.2500
15 70.0000 10 72.5000


Calculation of Buy price

Qty Price Value
15 71.0000 1065.00
5 71.5000 357.50
32 72.0000 2304.00
8 72.2500 578.00


Weighted average price would be 71.7425 = (4304.5/60) which would be used for calculating the margin requirement for this order.

For fresh limit order, system shall take the fresh order limit price instead of weighted average price of the best 5 bids and offers for calculation of margin requirement.

. How does the concept of Currency FuturePLUS Stop Losswork?

In case of Fresh Buy:
a) Current market Price rises – Position is making a profit You can choose to modify the sell cover SLTP order to a market order to immediately book profits at market price.
b) Current market price falls - Position is making a loss: Once the current market price starts rising and reaches Sell cover SLTP price, the cover SLTP order would be triggered to a limit order. The cover SLTP order would get executed at the best prices available up to the SLTP limit price.

In case of Fresh Sell:
a) Current market price rises - Position is making a loss: Once the current market price starts rising and reaches buy cover SLTP price, the cover SLTP order would be triggered to a limit order. The cover SLTP order would get executed at the best prices available up to the SLTP limit price.
b) Current market price falls - Position is making a profit: You can choose to modify the buy cover SLTP order to a market order to immediately book profits at market price.

. What is the margin that is charged on placement of FuturePLUS Stop Loss order?

Margin in case of fresh order is charged to the extent of maximum possible loss that you may incur OR margin computed as per SLTP Margin % , whichever is higher. You may visit Currency FuturePLUS Stop Loss Underlying List page to view prescribed margins for FuturePLUS Stop Loss product which are specified at each underlying level and please note these margins are likely to be changed on daily basis.

Formula:

Fresh Buy Market order: Maximum of {[(Weighted average price of fresh order - limit price of cover SLTP order) * Quantity], [(Weighted average price of fresh order * Quantity) * SLTP Margin %]}
Please note, in case fresh sell market order the first part of the formula will change where loss will be computed as Limit price of cover SLTP order - Weighted average price of fresh order, rest of the formula will remain the same.

Fresh Buy Limit Order:

Maximum of {[(Limit price of fresh order - Limit price of cover SLTP order) * Quantity], [(Limit price of fresh order * Quantity) * SLTP Margin %]}

Margin is blocked as per the above formula on order placement and adjusted further based on the actual execution with Trade prices.

For Example, 1 Fresh Market Order: Assume you take a buy position for the fresh market order of 1 lot (1 lot = 1000 quantity) at current market price of 70/-. Simultaneously you also place the Sell (cover SLTP order) of 1 lot as Limit price 68.8050/- and SLTP 69.5/-. The SLTP margin % for the scrip is either 1.5% or 2.5%. In this case margin will be blocked as below:

(A) In case the SLTP Margin % is 1.5%
Max{[(70 – 68.8050)*1000],[(70*1000*1.5%]}
= Max (1195,1050)
= 1195.00/-

(B) In case the SLTP Margin % is 2.5%
Max{[(70 – 68.8050)*1000],[(70*1000*2.5%]}
= Max (1195,1750)
= 1750.00/-

For Example, 2 Fresh Limit Order: In the above example if you place a fresh limit order at 69.95 the margin would be computed as below:

(A) In case the SLTP Margin % is 1.5%
Max{[(69.95 – 68.8050)*1000],[(69.95*1000)*1.5%]}
= Max (1145,1049.25)
= 1145.00/-

(B) In case the SLTP Margin % is 2.5%
Max{[(69.95 – 68.8050)*1000],[(69.95*1000)*2.5%]}
= Max (1145,1748.75)
= 1748.75/-

. Would the margin be recalculated when the order gets executed?

Yes, at the time of order placement the Limit Price or current market price or weighted average price upto the best five bids or offers as applicable at that point of time is considered. It may happen that execution happens at a different price than the one at which limits have been blocked. Thereby, margin is recalculated taking into consideration the actual execution price of the order.

. Would the margin be recalculated at the time of modification?

Yes, it is recalculated and excess amount if any will be released or additional margin needed will be blocked if you change the limit price of your fresh order or cover SLTP order.

(A) In the above example of fresh buy limit order where SLTP Margin % is 1.5%, if you modify the SLTP to 69.75/- and limit price to 69.0525/-.
The amount to be blocked would be recalculated as:
Max{[(69.95 – 69.0525)*1000],[(69.95*1000)*1.5%]}
= Max (897.5,1049.25)
= 1049.25/-
The excess amount of 95.75/- would be released and added in your limit.

(B) In the above example of fresh buy limit order where SLTP Margin % is 1.5%, if you modify the SLTP to 69.00/- and limit price to 68.31/-. The amount to be blocked would be recalculated as
Max{[(69.95 – 68.31)*1000],[(69.95*1000)*1.5%]}
= Max (1640,1049.25)
= 1640/-

Additional amount of 495/- would be blocked. If limits are insufficient then you will be unable to modify the order.

. Is the SLTP minimum difference % between SLTP and Limit price of Cover SLTP order different for different underlying?

Yes, I-Sec would define different SLTP minimum difference percentage for different underlying depending upon the volatility and market conditions of underlying.

. What is the difference between limit price and SLTP price that can be specified for a Cover SLTP Order?

Depending on the underlying volatility and market situation, I-Sec Ltd would specify the SLTP minimum difference % between limit price and SLTP of your cover SLTP order that can be maintained on order placement and modification for a particular underlying. This percentage could be revised by I-Sec even during the day. Existing orders would be unaffected by the revision but however if the orders are modified the revised percentage would apply.

The value for Limit Price would automatically appear in the Limit Price field based on the SLTP minimum difference % for the underlying between the Limit Price compared to the Stop Loss Trigger Price (SLTP).
Example: A 1% difference has to be maintained between the limit price and SLTP for cover SLTP order for USDINR.
You have taken a buy position (fresh order) of 1 lot (1 lot = 1000 quantity) in USDINR at Current price of 70/-. You specify the sell order (Cover SLTP order) for 1 lot in USDINR at SLTP of 69/-. Since this is a sell cover SLTP order the limit price would be lower than the SLTP. Limit price of Rs 68.31/- = (69-(69*1%)) will automatically appear in the Limit Price field.

. Where can I see the SLTP minimum difference % for a particular underlying?

You can view the SLTP minimum difference % between SLTP and Limit price of your cover order for various underlying by visiting the Currency FuturePlus Stop Loss Underlying list page of www.icicidirect.com

. If the Cover SLTP order gets rejected by Exchange, will I be able to re-enter the Cover SLTP Order?

Yes, you would be able to place Cover SLTP Order from the Open Positions screen where a link named 'Order' will appear if the same is rejected by Exchange. The link shall only appear when your fresh is full executed and cover is rejected.

. What happens to the open position remaining at the end of the day?

In case of FuturePLUS Stop Loss product, all the positions created for the day are expected to be squared off by the customers before the market closes as this is an Intra day product. In case, if the positions still remains open at the end of day, I-Sec on best effort basis would first cancel all the pending cover orders and then initiate the Square off process at a pre determined timing at market price for all the open positions.

If for any reason position still remains open after end of day then it will be treated as Futures position by exchange and I-Sec and all obligations and margin as applicable to Futures would apply to such open positions. If sufficient margin is not available with you towards such open positions, exchange would levy a short margin collection penalty which I-Sec shall recover from you. In case your cover order gets excess execution than your fresh order then such case shall be squared off on best effort basis by I-Sec and if for any reason, position still remains open after end of day then it will be treated as Futures position by exchange and I-Sec. This will also be handled by I-Sec on the same lines as mentioned above.

. What happens to the pending fresh and cover SLTP orders remaining at the end of the day?

In case of FuturePLUS Stop Loss Product, all the pending orders which remain unexecuted for the day would be cancelled by the I-Sec on best effort basis. However, for any reason order still remains pending and could not be cancelled then after end of day this shall get expired.

. Will there be any Mark to Market process like in normal Future trading?

No. Since the feature of cover SLTP order is available which also indicates the maximum downside involved in a particular position, there is no need of mark to market process.

. Do I have the option of Add Margin?

No. The option of Add Margin is not available, since it is not relevant due to absence of Mark to Market process in FuturePLUS Stop Loss product.

. Where do I view my open positions?

You can view your positions on the Open Positions page of your www.icicidirect.com account.

. Can I-Sec disable any contract or underlying from trading in FuturePLUS Stop Loss product during the day?

Yes, I-Sec can disable any contract or underlying from trading in FuturePLUS Stop Loss product during the day.

.What will happen to the orders that I have placed in such disabled contracts or underlyings?

You will be unable to place new orders in such contracts or underlyings. However, you can modify the orders already placed. To square off such positions you can modify cover SLTP order to a market order.

. Can I-Sec disable a contract or underlying from placing fresh Limit order in FuturePLUS Stop Loss product during the day?

Yes, I-Sec can disable a contract or underlying from placing fresh Limit order in FuturePLUS Stop Loss product during the day and may only allow market orders in such Contracts/Underlying.

. . What will happen to the fresh limit orders that I have placed in such disabled contract or underlying?

You will be unable to place new fresh Limit orders in such contract or underlying. However, you can modify the fresh Limit orders already placed to market. Modification of fresh order Limit price will be allowed.

. What would be the brokerage payable on these trades?

The Brokerage for FuturePLUS with Stop Loss Limit Margin orders would be the normal brokerages charged currently on similar lines to that of existing Future orders. You can refer the latest brokerage schedule on our website www.icicidirect.com on the path Tool-tip > Brokerage and Charges> My Brokerage Plans.

. What is Reference Price and Exchange Trade Price Execution Range?

In order to promote orderly trading, Exchange has prescribed Reference price and Execution range for Currency Futures and Options contracts. Orders shall be matched and trades shall take place only if the trade price is within the Trade Execution range based on reference price of the contract.

The reference price for each contract at market open shall be the theoretical price based on the underlying price or base price of the contract in case underlying price is not available at the time of computation, and during trade, it would be the simple average of trade prices of that contract in the last one minute. For contracts that have traded in the last one minute, the reference price shall be revised throughout the day on a rolling basis at one minute intervals. For other contracts, the reference price shall be the theoretical price based on the latest available underlying price and shall be revised throughout the day at regular intervals (thirty minutes).

If any order which is within the operating range but which may result in a trade outside the execution range is entered then such an order (full or partial as the case may be) shall be cancelled by the Exchange

Execution Range for Future Contracts

The execution range for future contracts with Tenure upto 6 months would be 1% around the reference price.

The execution range for future contracts with Tenure greater than 6 months would be 2% around the reference price.

. Will my FuturePLUS SLTP order be impacted due to Reference Price and Exchange Trade Price execution Range?

Yes, since in FuturePLUS SLTP you place two orders simultaneously wherein Fresh order will be Future market order with the second leg Future SLTP order. Any of the above two orders can get canceled from National Stock Exchange of India Ltd (NSE) if they try to match an opposite order whose price is not within the Trade Price execution Range.

. If the Fresh/Cover SLTP order gets canceled by National Stock Exchange of India Ltd (NSE), will I be able to re-enter the Market/Cover SLTP Order?

No. In case your Fresh/Cover SLTP order gets canceled by National Stock Exchange of India Ltd (NSE) due to Trade Price execution Range, you will not be allowed to re-enter either Fresh/Cover SLTP Order. In such cases I-Sec on best effort basis would first cancel pending fresh/cover orders and then initiate the Square off process for the pending Open position.

For Example:

Assume you take a buy position for the fresh order of 1 lot (1 lot = 1000 quantity) at current market price of 70/-. Simultaneously you also place the Sell (cover SLTP order) of 1 lot as Limit price 68.8050/- and SLTP 69.5/-. At the time of Execution of cover order, the execution price say for example 68.85/- is outside the Trade price Execution Range (68.95-70.5). Such order will be canceled by Exchange and you will be exposed to higher risk since there will be no order to cover your Open position. In such case I-Sec on best effort basis would try squaring off your net Open buy position at current market price.

Assume you try taking a buy position for the fresh order of 1 lot (1 lot = 1000 quantity) at current market price of 70/-. Simultaneously you also place the Sell (cover SLTP order) of 1 lot as Limit price 68.8050/- and SLTP 69.5/-. If the fresh order of SLTP product is a market order, execution price of market order depends on the available ask - bid prices and quantity at that point of time in exchange. Hence, in this case, if the execution of market order is going beyond exchange specified trade range, then the fresh order (fully or partially) could be canceled by exchange and you will be exposed to higher risk since reverse position can be created if cover SLTP order gets matched and traded within the Trade price Execution Range. In such case I-Sec on best effort basis would try canceling your pending cover SLTP order or if cover SLTP order is traded then try squaring off your net Open Sell position at current market price.

. Can I "Modify" my cover SLTP order once it gets canceled by National Stock Exchange of India Ltd (NSE)?

No. Once your Fresh/Cover SLTP order gets canceled by National Stock Exchange of India Ltd (NSE) due to Trade Price execution Range, you will not be allowed to "Modify" your cover SLTP order.

. Can my Fresh/Cover SLTP order get part canceled by National Stock Exchange of India Ltd (NSE)?

Yes. Your Fresh/Cover SLTP order can get part canceled by National Stock Exchange of India Ltd (NSE) if part of the ordered quantity tries to match part opposite order whose price is not within the Trade Price execution Range.

Assume you take a buy position for the fresh order of 2 lots (1 lot = 1000 quantity) at current market price of 70/-. Simultaneously you also place the Sell (cover SLTP order) of 2 lots as Limit price 68.8050/- and SLTP 69.50/-. At the time of Execution of cover order, there are two opposite orders finding match of 1 lot each at Rs 68.9025/- and 68.9675/-, respectively. The Trade price Execution Range at that point is Rs 68.9500-69.8075. Such order will be partly canceled (1 lot at Rs 68.9025/-) and partly executed (1 lot at Rs 68.9675/-) by Exchange and you will be exposed to higher risk since there will be no order to cover your part open position. In such case I-Sec on best effort basis would try squaring off your net part open buy position (1 lot) at current market price.

Assume you try taking a buy position for the fresh order of 2 lots (1 lot = 1000 quantity) at current market price of 70/-. Simultaneously you also place the Sell (cover SLTP order) of 2 lots as Limit price 68.8050/- and SLTP 69.50/-. At the time of Execution of fresh order, there are two opposite orders finding match of 1 lot each at Rs 69.5550/- and 69.7525/-. The Trade price Execution Range at that point is Rs 68.7-69.6575. Such order will be partly canceled (1 lot at Rs 69.7525/-) and partly executed (1 lot at Rs 69.5550/-) by Exchange and you will be exposed to higher risk since reverse position will be created if cover SLTP order gets matched and traded within the Trade price Execution Range (68.7-69.6575). In such case I-Sec on best effort basis would try canceling your part cover SLTP order or if cover SLTP order gets traded then try squaring off your net part open Sell position (1 lot) at current market price.

. Can i do anything if any of my Fresh/Cover order gets part canceled by National Stock Exchange of India Ltd (NSE)?

Yes. You can use "Quick Exit" link available against the Fresh order of such paired order(s) under the Order book & also available under Open position page for the position created, if any. Quick Exit will help to close such open paired order(s) or position, if any under a particular contract. To know more about "Quick Exit" please refer below FAQs.

. What is Quick Exit?

Quick Exit is a facility provided to quickly close any particular open FuturePLUS Stop Loss(FPSL) orders / positions under a particular contract.

Example:

Case 1 - In a case where fresh order is part executed and cover order is ordered and you want to book profit by squaring off your position with the help of "Quick Exit" link given on Order Book and Open Position then system will
1. Cancel fresh order for the unexecuted quantity and
2. After confirmation of fresh order cancellation, system will cancel cover SLTP order and place a market square off order for the executed quantity

In such cases this link will help customer to book profits for the part executed open position.

Case 2 - If your Fresh order is executed and SLTP order is in ordered status and if you do Quick Exit a confirmation message will be displayed stating that "Do you want to proceed with Quick Exit" and on clicking "Ok" system will first cancel your SLTP order which was unexecuted and immediately place a square off order against the fresh executed quantity.

Case 3 - If Fresh order is in ordered status and SLTP order is also in ordered status, then on clicking Quick Exit and the process confirmation message will be displayed stating that "Do you want to proceed with Quick Exit" and on clicking "Ok" system will cancel your Fresh and SLTP orders.

. Will Quick Exit link be displayed against all the orders in order book.?

No. Quick Exit link will be displayed only against FuturePLUS Stop Loss(FPSL) fresh order(s) in order book irrespective of the status.

. Will Quick Exit link be displayed against all the positions in FuturePLUS Stop Loss(FPSL) open position page?

Yes. Quick Exit link will be displayed against each open position on FuturePLUS Stop Loss(FPSL) position page under Action column and below "SquareOff at Market" link.

. Is there any difference if I do Quick Exit from Order book or FuturePLUS Stop Loss(FPSL) position page?

No. There is no difference if you do Quick Exit from order book or open position page.

. Will Quick Exit link be displayed in order book for already closed positions?

Yes Quick Exit link will be displayed against all fresh orders irrespective of the status. However there will be no impact if you run Quick Exit for already closed positions.

 

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h) About Currency Option and trading in Currency Option at ICICI Securities Ltd (I-Sec)

1. What is Options Trading at ICICIdirect.com?

As a customer of ICICIdirect, you can now trade in Currency Options on NSE. It comes with a comprehensive tracking cum risk management solution to give you enhanced leveraging on your trading limits.

You can take buy/sell positions in USDINR currency contracts expiring in different months with various Strike Price. If, during the course of the contract life, the exchange rate moves in your favor (rises in case you have a buy position or falls in case you have a sell position), you make a profit. In case the exchange rate movement is adverse, you incur a loss. To take the buy positions on index/stock options you have to pay certain premium. To take the sell position in currency options, you have to place certain % of order value as margin. With options trading, you can leverage on your trading limit by taking buy/sell positions much more than what you could have taken in cash segment. However, the risk profile of your transactions goes up.

2. What is a Call?

Call is the Right but not the obligation to purchase the underlying Asset at the specified strike price by paying a premium.

The Buyer of a Call has the Right but not the Obligation to Purchase the Underlying Asset at the specified strike price by paying a premium whereas the Seller of the Call has the obligation of selling the Underlying Asset at the specified Strike price.

3. What is a Put?

Put is the Right but not the obligation to sell the underlying Asset at the specified strike price by paying a premium.

The Buyer of a Put has the Right but not the Obligation to Sell the Underlying Asset at the specified strike price by paying a premium whereas the Seller of the Put has the obligation of buying the Underlying Asset at the specified Strike price.

4. What is a strike Price?

It is the Price at which the underlying asset is agreed to be bought or sold.

5. What is a premium?

Premium is the down-payment which the Buyer of Call Option or Put Option is required to make for entering the options agreement.

6. What is a European option?

These options give the holder the right, but not the obligation, to buy or sell the underlying instrument only on the expiry date. This means that the option cannot be exercised early. Settlement is based on a particular strike price at expiration. Currently, in India Currency Options is European in nature.

7. What is an American Option?

These options give the holder the right, but not the obligation, to buy or sell the underlying instrument on or before the expiry date. This means that the option can be exercised early.

8. On which exchanges will I be able to buy and sell in Options market?

Currently, ICICIdirect offers Currency Derivative Options trading facility on the National Stock Exchange of India Ltd. (NSE).

9. How is Options trading different from Futures trading?

In case of Futures the Buyer has an unlimited loss or profit potential whereas the buyer of an Option has unlimited profit and limited downside. Similarly the Seller of a Futures has an unlimited loss or profit potential whereas the seller of an option has a limited profit but unlimited downside.

10. How is Options Contract Defined?

USDINR Call Option contract expiring on 26 Aug 2014 with strike price of 60 is described as OPT-USDINR-26-Aug-2014-60-CE

Similarly USDINR Put Option contract expiring on 26 Aug 2014 with strike price of 60 is described as OPT-USDINR-26-Aug-2014-60-PE

OPT denotes Option, USDINR is the underlying, 26 Aug 2014 is the expiry date of the contract, 60 is the strike price, CE denotes it is a European Call option and PE denotes it is a European Put option

11. Which contracts under an underlying are enabled for Options trading? Why is the contract list restricted to specific contracts only under various underlyings?

ICICIdirect enables selected contracts under various underlyings for trading in the Options segment. Only those contracts, which meet the criteria on liquidity and volume are considered for Options trading. This is required as there may be a risk of lower liquidity in some contracts as compared to active contracts. As a result, your order may only be partially executed, or may be executed with relatively greater price difference or may not be executed at all. Thereby to safeguard your interest such illiquid contracts are disabled for trading on www.icicidirect.com. The list of contracts is subject to modification by ICICIdirect from time to time.

12. Can an enabled contract be disabled later ?

Yes, it is possible that ICICIdirect disables a contract that was enabled earlier. This could happen due to various reasons like the underlying is disabled from Exchange.

13.Can I square off my position once the contract is disabled?

Yes, you can square off your open positions using the square off link on the Open Positions page when the contract is disabled for trading.

14. Where can I view Options contracts?

When selecting any contracts, only enabled contracts will be displayed for trading on the website. Contracts can be selected from either 'Place order' link or 'Underlying list' page on www.icicidirect.com.

15. Would Different Margin percentage be applicable to different Underlyings?

Currently only USDINR underlying is enabled for option trading but yes, after introduction of more underlyings ICICIdirect.com would levy different margin percentages on different underlyings depending on market volatility as it feels is necessary for Risk mitigation.

16. Can margin be changed during the life of contract?

Yes, margin % can be changed during the life of the contract depending on the volatility in the market. It may so happen that you have taken your position and 5% margin is taken for the same. But later on due to the increased volatility in the prices, the margin % is increased to 6%. In that scenario, you will have to allocate additional funds to continue with open position.

17. How is margin (premium) calculated on Buy orders in Option?

Buy orders irrespective of whether it is a Call or a Put, is margined only to the extent of the Premium payable on the order. For e.g. If you place a Buy order in OPT-USDINR-26-Aug-2014-60-CE for 10000 (10 Lots) quantity at a Limit price of 0.8525 would attract margin of Quantity * Price at Rs 8525/-.

18. How is Margin calculated on Sell orders in option?

Since the seller of the option is exposed to a higher risk than the buyer of an option, the margin calculation is slightly different as compared to Buy orders. ICICI direct would specify a Initial Margin percentage as it feels is commensurate with the volatility and the current position of the underlying. This percentage would be applied to the Current Market Price (CMP) of the Underlying.

19. Would In-the-Money or Out-of-the-Money be considered for Initial Margin calculation in case of Sell Orders?

Yes, In-the-Money or Out-of-Money would be considered while calculating the Margin on Sell orders. In case of In the Money, the seller of the option would be required to bring in additional amount equal to the difference between CMP and the Strike price in case of Call and difference between Strike price and the CMP in case of Put. In case of Out of money, the seller of the Option is given the benefit and would be required to bring in lesser amount equal to difference between Strike price and the CMP in case of Call Option and difference between CMP and the Strike price in case of Put Option. The formulaes are as follows:

Additional Amount required:

In-the-Money Call: (C.M.P. - Strike Price) * Quantity

In-the-Money Put: (Strike Price - C.M.P.) * Quantity

Out- of-the- Money Call Benefit: (Strike Price - C.M.P) * Quantity

Out- of - the- Money Put Benefit: (C.M.P. - Strike Price) * Quantity

The Initial Margin so arrived is compared with a Minimum Margin (SOMC margin) i.e the Short option margin Percentage, the higher of the two margins is taken into account.

20. Would the Premium to be received be considered for Marginable sell orders?

No, Premium benefit will not be given at the time of placing Marginable sell orders.

Once the order is executed the benefit of the Premium is withdrawn since the Premium is now a crystallized entry for which you would get the Payout on the Indicated payout date. Now the entire margin amount is blocked from the limits. The following Illustration shows how margin is calculated on sell orders (Applicable to both Call and Put orders)

You place a sell order in OPT-USDINR-26-Aug-2014-60-CE, for 5000 quantity at a limit price of 0.9925/-

Current Market price of USDINR is 58.

Initial margin on USDINR is 10%.

The Seller is Out-of-the-Money in this case and the seller gets benefit of this.

(a) Margin = Qty * (CMP * IM% - (Strike Price - CMP) 5000 * (58*10% - (60-58)) = Rs 19000

Margin on Order would be = Rs 19000

21. Is the separate Margin Blocked for Buy and Sell Orders?

No, margin is blocked on the order which attracts higher Margin out of the Buy or Sell order.

If you have placed both a buy and sell order in the same contract Margin blocked would be the maximum of the two orders.

Illustration

As in the above illustration the sell order attracts a margin of

(a) Rs 19000/-.

If you place a Buy order in the same Contract OPT-USDINR-26-Aug-2014-60-CE 5000 at Rs 0.9925/- it would attract margin of

(b) Rs 4962.5/-.

Margin blocked would be the higher of the two margins (a) or (b) i.e. Rs 19,000/-.

22. Is margin blocked on all Options Orders?

No. Margin is blocked only on orders, which result in an Increased Risk exposure. Margin is not recovered from an order, which is cover in nature. However in case of buy cover order where the premium exceeds the margin blocked, extra margin is required for placing the order. If a Position of opposite nature is present then the Order is reduced by the opposite position, if the opposite position is greater than the order, then the order is not margined at all. For e.g.

a) if you have a Buy position of 5000 in OPT-USDINR-26-Aug-2014-60-CE, and you place a sell order of 4000 then the sell order becomes non-marginable.

b) If you have a sell position in OPT-USDINR-26-Aug-2014-60-CE, and the margin blocked is Rs.19000 and a cover buy order is placed which requires total premium of Rs.21000.00, then extra margin to the extent of Rs. 2000.00 (21000-19000) is required.

23. What happens if buy or sell orders are placed when there is some open position also in the same contract?

In both cases buy and sell, the Marginable Buy order or Marginable Sell order is arrived at the Contract level. Marginable Buy order is calculated by deducting Net Sell Position from the Total Buy orders

Marginable Sell order is calculated by Deducting Net Buy Position from the Total Sell orders

Margin is recovered only on the Marginable Buy/Sell order Quantity.

24. How do I place a square off order to cover my open positions?

You can place the square off order either through the normal buy/sell page or through a hyper link "Square off" on the "Open Position" page. It is advisable to place cover order from open positions page through the "square off" link since the lots available are displayed on the Square-off Order Placement page and you are aware of the lots for which you are placing the square off.

25. Can I Exercise My Buy (Call/Put) Option?

No you cannot exercise your Buy options since currently in India Currency Options are European in nature.

In case of European Options the contracts can be exercised only on the last day of the contract expiry. All In the Money European contracts will be automatically exercised by the exchange on the last day of contract expiry, hence there will be no additional option for exercising on www.icicidirect.com.

In case of an American option you can place an exercise request upto the Open (Call/Put) buy position anytime except on the Last date of the contract expiry.

26. What is Exercise ?

On expiry date of an option contract, all in-the-money positions are exercised by exchange.

27. Is there a specific time when I can place my exercise request?

Currently in India, Currency Options are European in nature thereby you don't have the option to place exercise but they will be auto exercised on the expiry date if they are In-the-Money.

28. What is the Effect of Exercise?

The profit on exercise is reflected in the Cash Projections and is added to the Limits. The realized profit on the contract is also reflected in the Portfolio page.

29. How is Profit calculated on Exercise?

In case of Exercise the profit is calculated as the difference between the Exercise Settlement price of the Underlying and the Strike price of the contract. This is then multiplied by the exercised quantity and reduced by the applicable statutory levies and taxes.

30. Is exercise quantity considered for Margin calculation?

Yes, the exercised quantity is reduced from the open positions in the Marginable sell order quantity calculation. Hence the sell order placement would be marginable if the quantity of sell order exceeds the difference between the executed Buy position and the exercise request quantity i.e. Sell order Qty is greater than (Buy Position Qty - Exercised Qty). However, currently all Currency Option contracts are European in nature and exercised on Expiration of the contract.

31. Is part exercise possible by the exchange?

No, only full quantity will be exercised by exchange.

32. What is assignment?

In case you have a Sell position, you may be assigned the contract i.e. you will have to Buy the Underlying in case of Put. However since options are currently cash settled you would have to pay the Money

On expiry date of an option contract, all out-of the-money short positions are assigned by exchange.

33. How do I know I have been assigned?

The Assignment book will reflect the assigned quantity in the contract along with the settlement price. The loss on assignment is reflected in the Cash Projections and is reduced from the Limits. The realized loss on the contract is also reflected in the Portfolio page.

34. Do I have any control over Assignment?

No, You have no control over Assignment since it is initiated by the exchange.

The Assignment process is completely decided by the exchange.

35. Is there a Daily EOD MTM just like Futures?

No, there is no daily EOD MTM in case of options like in case of Futures.

36. Is MTM done in case of options?

Yes, but it is applicable only in case of Short Positions i.e. Sell Call and Sell Put.

37. What is the Basis of MTM in case of Sell Call and what happens in the MTM process?

As soon as you place a Sell call order, which results in a position, a Trigger price is calculated (as per the formula given below) which is displayed in the Open positions book. Whenever the Underlying price of the currency goes above the Trigger price in case of Sell Call, the Contract would be in the MTM loop. First the Additional margin is recalculated as per the new scenario due to price rise is blocked; if Additional margin is found to be insufficient then the orders in the same contract are cancelled. If both these measures fail, then the position is squared off by the ICICIdirect.com.

    (Strike Price + Margin Amount)
Trigger Price for Sell Call position = -------------------------------------
    (1 + Minimum Margin %)

For Example:

You have a sell position in OPT-USDINR-26-Aug-2014-60-CE

Current Market price of USDINR is 58.

Initial margin on USDINR is 10%.

Initial Margin = (58*10% - (60-58)) = Rs 3.8

Minimum Margin on USDINR is 5%.

Trigger Price for Sell Call Position = (60 + 3.8) / (1+ 5%) = 60.7619

When the USDINR price would rise above 60.7619 the sell position in OPT-USDINR-26-Aug-2014-60-CE would be in the MTM Loop.

38. What is the Basis of MTM in case of Sell Put and what happens in the MTM process?

As soon as you place a Sell Put order, which results in a position, a Trigger price is calculated (as per the formula given below) which is displayed in the Open positions book. Whenever the Underlying price of the shares goes below the Trigger price in case of Sell Put, the Contract would be in the MTM loop. First the Additional margin recalculated as per the new scenario due to price fall is blocked; if Additional margin is found to be insufficient then the orders in the same contract are cancelled. If both these measures fail, then the position is squared off by the ICICIdirect.com.

    (Strike Price - Margin Amount)
Trigger Price for Sell Call position = -------------------------------------
    (1 - Minimum Margin %)

For Example:

You have a sell position in OPT-USDINR-26-Aug-2014-60-PE

Current Market price of USDINR is 62.

Initial margin on USDINR is 10%.

Initial Margin = (62*10% - (62-60)) = Rs 4.2

Minimum Margin on USDINR is 5%.

Trigger Price for Sell Put Position = (60 - 4.2) / (1 - 5%) = 58.7368

When the USDINR price would fall below 58.7368 the sell position in OPT-USDINR-26-Aug-2014-60-PE would be in the MTM Loop.

39. How do I check if there is a margin shortfall on any open position?

If the Spot Price of the underlying has breached the Trigger Price of any open position, then Trigger Price of such position would be highlighted in red color on the Open Positions page indicating that the position may be squared off in the Intraday MTM process, if additional margin is not allocated. This shall be considered as a margin call on that position. You are advised to allocate additional margin immediately to meet the margin shortfall else such position may be squared off by I-Sec.

Further, please note that the Open Positions page does not refresh automatically. You need to frequently refresh the page by clicking on 'View' button to view latest details.

40. If limits are found to be insufficient is the whole position sent for square off in both cases of sell call and sell put?

No, Square off is done in both cases in lot size of the contract. On acceptance of the square off placed, the new trigger price is calculated and whole process as explained above for sell call and sell put is repeated. This goes on till either sufficient margin is available or the complete position is squared off whichever is earlier.

41. What happens if I do not square off the transaction till the last day?

All "Out of the Money" positions which are not exercised or assigned will be marked as closed off and the position will not appear in the open positions page. The closed off entry will appear on the Portfolio Details page as Close out .

42. How is brokerage calculated in case of options?

Brokerage in options is calculated on per lot basis. Please refer Fee schedule on Customer Service page for more details.

43. Is there any hedging benefit between Currency Futures and Options?

No. Currently ICICIdirect is not offering any hedging benefit between Futures and Options.

44. Is there any hedging benefit between Currency Options?

No. Currently ICICIdirect is not offering any hedging/spread benefit within Currency Options. Thereby, customers are advised to monitor all the options positions as independent positions and allocate margin for all individual open Option positions (if additional margin is required).

45. What is Reference Price and Exchange Trade Price execution Range for Option Contracts?

In order to promote orderly trading, Exchange has prescribed Reference price and Execution range for Currency Futures and Options Contracts. Orders shall be matched and trades shall take place only if the trade price is within the Trade Execution range based on reference price of the contract.

The reference price for each contract shall be the theoretical price based on the underlying price at market open, and during trade, it would be the simple average of trade prices of that contract in the last three minutes. For contracts that have traded in the last three minutes, the reference price shall be revised throughout the day on a rolling basis at one minute intervals. For other contracts, the reference price shall be the theoretical price based on the latest available underlying price and shall be revised throughout the day at regular intervals.

If any order which is within the operating range but which may result in a trade outside the execution range is entered then such an order (full or partial as the case may be) shall be cancelled by the Exchange

Execution Range for Option Contracts

For option contracts, between Rs.0.0025 to Rs 0.50, there would be a minimum absolute range of Rs.0.05 around the reference price.

For option contracts above Rs.0.50 it would be 10% around reference price

46. If the Fresh/Cover order gets canceled by Exchange, will I be able to place the order once again in the same underlying and contract?

Yes. But the order entered should be such that it lies within the reference price and also the trade execution occurs within the execution range. If these criteria are not met then the order will be fully/partly cancelled by the exchange.

47. Can my Fresh/Cover order get part canceled by the Exchange?

Yes. Your Fresh/Cover order can get part canceled by the Exchange if part of the ordered quantity tries to match part opposite order whose price is not within the Trade Price execution Range.

Assume you place a buy fresh order of 2000 quantity at a limit price of 0.8900/-. At the time of Execution of Buy Order, there are two opposite orders finding match of 1000 quantity each at Rs 0.8850/- and 0.8800/-, respectively. The Trade price Execution Range at that point is Rs 0.7925 - 0.8800. Such order will be partly canceled (Quantity 1000 at Rs 0.8850/-) and partly executed (Quantity 1000 at Rs 0.8800/-) by Exchange.

 

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i) Withheld Profit

1. What is 'Withheld Profit' amount and when will this amount be released in my limits for further use?

As per the regulatory requirement, Futures & Options profits that are booked but unsettled (i.e. payout/credit of funds is yet to be received), cannot be used to take further exposure as margin till the time they are settled by regulators. Accordingly, such cumulative net profit amount after adjusting the losses for that day across all products is withheld from your current limits. In case there is a cumulative net loss for the day post adjustments of all unsettled profits and losses then there will not be any amount withheld from limits till you make cumulative net profits which are unsettled. You can use this withheld amount for taking further exposure once the 'Withheld Profit' amount is released/added to your current limits which is done after the EOD processing when the next trade date is greater than or equal to the funds payout date.

2. What is the significance of this 'Withheld Profit' amount in trading?

You will not be allowed to use the 'Withheld Profit' amount as limits for taking further exposure*, till this amount is settled.

*Further exposure would mean any new orders/positions or any actions requiring add margin against your existing open positions across all products under Futures and options.

3. Where can I see this 'Withheld Profit' amount?

You can go to the website www.icicidirect.com and visit the 'Limits' page under 'Currency' section to view the field 'Withheld Profits' to know if any unsettled cumulative net profit amount is withheld.

4. When will the withheld profit amount be settled/released/added in my limits? What all amounts would be used to calculate cumulative net profits or losses?

If there is a cumulative net profit amount which is unsettled then such amount will be withheld and will be released/added in your limits once the profits are settled or when the next trade date is greater than or equal to the pay out date for the profit amount, whichever is earlier. All during the day or end of day profits or losses across all products in Currency including premiums receivable or payable for Option product will be adjusted to arrive at the cumulative net profit/loss amount.

5. Whether profit/ loss of all Future and Options products will be impacted?

Yes, profit/ loss across all Futures and Options products will be impacted and considered while arriving at the withheld profit amount which is unsettled.

6. How will the withheld amount be calculated during the day and end of the day?

  • During the day: All profit amount along with the premium amount receivable shall be added and all losses along with the premium amount payable shall be deducted to arrive at the withheld profit amount.
  • End of the day: On similar lines of during the day adjustments mentioned above, end of day profits in case of Future & options like EOD MTM profits, exercise profit etc. which are yet to settled with actual pay-out will be considered for arriving the withheld amount post adjustment of end of day losses like EOD MTM, close out, assignment etc.

7. What if I have profit in the first trade and I want to place another order, can I use that profit to palace another order during the day?

No, if you have profit during the day which are unsettled and pay-out is not received from clearing house then you cannot use that profit for placing the second order. You can place another order after bringing in sufficient limits under Currency.

8. Can I use withheld or unsettled profits to add the margin requirement for my positions during the day?

No, you cannot use the unsettled withheld profit amount if there is any margin requirement on your existing positions during the day. You will need to allocate sufficient funds/limits under Currency for this purpose.

9. Can I use the premium receivable from the Option trades which are unsettled and withheld to place another order under Currency?

In case the premium receivable during the day results in cumulative net profit after the above mentioned adjustments then this amount will be withheld and will not be allowed to be used for placing fresh orders across all products under currency.

10. Will there be any amount withheld if there is a cumulative net loss?

No, there will be no amount withheld in case there is a cumulative net loss after all the adjustments mentioned above.

11. When will the 'Withheld Profits' get released in limits?

Any 'Withheld Profits' on T day will be released after EOD processing, in case the next trade date and settlement/payout date is same and in case there is a holiday then the 'Withheld Profit' will be release in your limits when the next trade date is equal to or greater than the Settlement/Pay out date.

12. What happens if the cumulative net amount at any point is Negative or Zero?

If the cumulative net amount arrived at any point in time is Negative or zero, then in that case there will be no 'Withheld Profits' amount in your limits.

13. Will I be able to use the value in the 'Withheld Profits' column for taking positions on next trade date?

Yes, the 'Withheld Profits' amounts will be added to your current limits on next trading day if the pay-out date is equal to or less than the next trade date.

 

i) Settlement Obligation in Currency Options

1. What kind of settlement obligation will I have in Options?

  1. Brokerage: Any Transaction you enter into will attract brokerage. Brokerage is debited to your account at the end of the day.
  2. Premium payable or Receivable
  3. Profit on Exercise
  4. Loss on assignment

2. When will the obligation amount be debited or credited in my Bank Account?

Assuming you place a transaction on day T, Options obligation will be settled as per the following table.

Condition Obligation Settlement
Option Premium Receivable T+1
Option Premium Payable T
Exercise Profit T+1
Assignment Loss T
Brokerage T

3. What happens if I have a margin / premium obligation towards the Exchange and have open position under Options Buy Call and/or Put?

In case client does not have sufficient free limit available in such cases system may even square off Options Buy positions to recover the required margin / premium obligation amount towards Exchange.

4. Where can I see my settlement obligation?

You can see your obligation on cash projection page. The date on which the amount is to be deducted or deposited in your account can be checked from the "Cash projection" page. You can even see the historical obligation (already settled) by giving the respective transaction date.

5. On T+1 day I have a payin for a particular trade date and also payout for a different trade date? Will payin and payout be run separately?

No, if payin or payout falls on the same date, the amount is internally set off and only the net result payin or payout will be debited or credited to your bank account.

In cash projection, distinct particulars would be given for payin/payout internally settled and settled by way of debit/credit in bank.

6. Can I square off the open positions in the disabled underlying?

Yes, you can square off the open positions in the disabled underlying through square off link available on open position page.

7. I have placed the square off order. Can I modify that order?

Yes. You can modify square off order if not executed.

8. What is meant by a freeze order? What should I do in case an order is Freezed?

Orders in Options may get freezed at the exchange end. There is only quantity freeze (no price freeze) in case of options. In case of Currency Options the quantity should not be beyond 10,001.

9. Where can I see that my order is freezed?

The orders in currency options that get freezed appear with a "Freezed" status in the order book and the details of freeze can be seen in the order log by clicking on the order reference hyperlink.

10. What should I do in case an order is Freezed?

If your order gets freezed, you can call up the call centre number and provide the required details about the order. ICICI Securities will inform the exchange about the details of your freezed order. Exchange may at its discretion release or reject the request for releasing Freezed orders. Till the order is unfrozen, the limits are blocked to the extent of order which got frozen.

11. Is there any hedging benefit between options?

No. Currently ICICIdirect is not offering any hedging/spread benefit within Options. Thereby customers are advised to monitor all the options positions as independent positions and allocate margin for all individual open Option positions (if additional margin is required).

 

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j) Specific FAQs on BSE

1. Can I now trade in Currency Futures and Options on BSE?

Yes you can now trade in Currency Futures and Options on BSE. Only contracts that meet the liquidity criteria will be enabled for trading at the discretion of I-Sec.

2. Can NRIs trade on Currency BSE Derivatives?

No.This facility is not enabled for NRIs.

 

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k) Specific FAQ on Exchange specified Clientwise limit

1. What is the maximum exchange specified Clientwise limit allowed in Currency segment?

Exchange has specified client level position limit for each underlying/Index. In case client has breached the exchange specified clientwise position limit then exchange will charge penalty or may take any other action. Hence, if client breaches the exchange specified clientwise position limit, then I-Sec will square off the excess position on best effort basis even if the client has sufficient margin on excess position. Kindly note that the primary responsibly will remain with the client only to not exceed the exchange specified client level position limit.

Kindly note that in case exchange charges any penalty in this regard, then the said penalty amount will be passed/recovered from the client.

 

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l) Charges

1. I am a registered customer of I-Sec holding a 3-in-1 account. Do I have to pay any charges for registering myself for Currency trading?

No.

Customers who do not have an existing 3-in-1 account will have to open a 3-in-1 account containing the currency derivatives documentation. Normal 3-in-1 account opening fees would apply for such applicants.

 

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m) Contact Us

Call our 12-hour Customer Care Number
you can also write to us directly at helpdesk@icicidirect.com