Real-time Dynamic CFS on sale of shares
November 17, 2020 at 3:29:38 PM
Real-time Dynamic CFS on sale of shares
Provisioning better capital efficiency for positional traders.
Post implementation of margins in cash segment a lot has changed for positional & day traders, since the implication of this new regulation we’ve implemented many methodologies to ensure smooth trading while being in complete compliance to regulators (SEBI) guidelines.
To make positional trading further more capital efficient and reduce the bottlenecks of margins, we have introduced ‘Real-time Dynamic CFS on sales of DP stock’. What this means is now as a client of PM Securities you shall be able to sell the shares that you hold in your demat a/c and instantly get the CREDIT FOR SALE (CFS) that can be further used as margins for other fresh positions. But there are a few things you should know:
Assume that you have Rs. 0 as margins but you do hold 10 shares of Reliance in your demat a/c.
Now you decide to purchase 50 shares of TCS for which you require margins worth Rs. 20,000.
The moment you sell 10 shares of Reliance at market price of Rs. 2000 / share, you shall receive Rs. 20,000 (10 * 2000) as CFS
You can now use this 20,000 rupees as margins to purchase your intended shares of TCS.
To get ‘Real-time Dynamic CFS on sales of DP stock’ it is required that the following conditions are met:
The shares being sold by you are held in PM Securities Demat A/c and not with any other DP
The shares being sold should be free holdings ie. NOT pledged / locked / frozen for any reason
You have a valid POA (Power of attorney) submitted at the time of opening a Demat A/c with PM Securities
If CFS provided on sales of shares is used as margins to place new orders / execute trades this will limit your ability to Square off the sold shares if you decide so later in the trading day.
Eg. Continuing from the above example of Reliance / TCS, the CFS of Rs. 20,000 received by selling Reliance was used up completely to provide for margins required to purchase 50 shares of TCS. Now if you decide to re-purchase the sold shares of Reliance you will not be allowed to do so as you have already used the CFS received on sales of Reliance shares to fund the margins of TCS (Assuming you have Rs. 0 margins available excluding the CFS of Rs. 20,000)
But if you still wish to re-purchase the sold shares of Reliance you can do so by either of the below methods:
Square Off your TCS position: This shall free up margins by : Rs. 20,000 minus Loss on the position (if any) , and then you can re-purchase reliance in full or in part. If you book loss on Squaring Off your TCS position you may be able to repurchase less shares of reliance than you sold to adjust for the margins for your booked loss.
Make available additional funds to provide for the margins of the open position of TCS. So, if you add Rs. 20,000 funds to your margin it shall cover the margin requirement of TCS and allow you to re-purchase Reliance.
The above example is an edge-case limitation which only occurs when your margin utilisation is running neck to neck with margins available. For most other times it wouldn’t be much of a real world limitation.
CFS Representation in Softwares:
You shall be able to view ‘CFS’ tab in the margins tab of client dashboard / margin report (cntrl+m) in both FastTrade & MarketPulse trading applications, that shall reflect the CFS made available in realtime.
The above provision of ‘Real-time Dynamic CFS on sales of DP stock’ shall be a complete autonomous function of PM Securities RMS and shall entail better capital efficiency to positional traders while being in complete compliance of the regulators guidelines.
We are also working on introducing Real-time Dynamic CFS for BTST (Buy today sell tomorrow) unsettled trades to further enhance capital efficiency. We are expecting to launch the same within 2 weeks and shall keep you posted on the same.