SEBI had decided to compulsorily settle stock derivatives physically in a phased manner, starting with 46 stocks in July 2018. This has now become applicable to all the stock derivative contracts, starting October 2019. Under this, if you hold a position in any of these contracts on the expiry date, you will have to give/take delivery of the stocks.
Accordingly, effective Friday – 22 Nov, 2019, changes applicable on trading with Upstox in Stock Derivatives for the current month (November) contract expiry and all expiries going forward is as follows:
- Clients shall not be permitted to initiate a fresh position in stock options from 5 days prior to expiry of any month. Correspondingly, conversions of carry-forward stock option positions shall not be permitted.
- Delivery margins would be applicable—as per Exchange norms—on all the existing long ITM (In The Money) stock option position in a staggered manner as explained below:
20% of delivery margins computed on expiry -4 days EOD (Friday)
40% of delivery margins computed on expiry -3 days EOD (Monday)
60% of delivery margins computed on expiry -2 days EOD (Tuesday)
80% of delivery margins computed on expiry -1 day EOD (Wednesday)
To avoid margin shortages, Upstox would be blocking such (above mentioned) delivery margins from the Beginning of the Day (BOD) instead of End of the Day (EOD).
- Clients shall not be permitted to initiate a fresh position in stock futures from 1 day prior to the expiry of any month. Correspondingly, position conversion(s) on carry forward of any stock futures positions shall also not be permitted.
The RMS team shall begin squaring off all the existing open positions of the expiring Futures and Options contracts from 2.30 pm onwards, a day prior to the expiry day at the prevailing market price on a best-effort basis. If the positions are not squared off for any reason (e.g: non-liquidity), then the contract would have to be settled physically and the client would be liable to pay the entire amount of the settlement.
For your reference, you could also go through the SEBI and NSE circulars on physical settlement as below:
SEBI circular: SEBI/HO/MRD/DOPI/CIR/P/2018/161
NSE circular: FAOP39824