What is a margin shortfall and a margin call?

Margin Shortfall in MTF (Margin Trading Facility)

A margin shortfall occurs when the required margin for MTF is not fully available in the client’s account. This may happen due to the following reasons:

• Increase in margin requirements – for example, if the VaR % of a particular scrip is revised upwards.

• Decrease in the market value of the pledged stock used as collateral for MTF.

• Decrease in the market value of the MTF-funded stock.

Actions Taken by Jainam in the Case of Margin Shortfall

1. Margin Call :
   Jainam will issue a margin call to the client via SMS and email, notifying them about the shortfall.

2. Trade Conversion :
   If the margin shortfall is not resolved within 5 days from the margin call, the trade will be automatically converted into a delivery trade (CNC – Cash and Carry).
   This means the position will be treated as a regular delivery trade, and the client will be required to pay the full value of the shares. This may result in the creation of an ageing debit in the client’s account.

3. Liquidation of Shares :
   If the ageing debit is not cleared within the stipulated time, Jainam will liquidate (sell) the shares bought under MTF to recover the outstanding dues.

RELATED FACTS

• If only partial margin is available on T-day, then MTF funding will be done proportionately, based on the available margin.