Why are the haircuts for stocks like Reliance and HDFC different on the platform and in the daily margin report ? In the former the haircuts are 15%, in the latter they are 12.5% (screenshots below). Why do we have inconsistencies? This negatively affects the margin benefit received.
Hi,
The difference in haircuts arises because the haircut shown in the daily margin report is based on the exchange’s mandated haircut, while the haircut shown on the platform is the one determined by Upstox’s internal risk management policies.
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Exchange Haircut: The exchange determines a standard haircut, which is typically lower (12.5% in your example). This is the minimum haircut that is required to be maintained for stocks pledged for margin purposes.
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Platform (Upstox) Haircut: Upstox, as a broker, may apply a higher haircut (15% in your case). This higher haircut can be due to the broker’s internal risk management policies, which account for factors like market volatility and liquidity. This is intended to protect the broker and its clients from sudden price fluctuations that could lead to margin shortfalls.
Why the difference?
- Brokers, including Upstox, may apply higher haircuts than the exchange’s mandated ones based on their own risk assessments. This is why you might see a different haircut value on the platform compared to what is shown in the exchange’s daily margin report. The additional haircut helps mitigate the broker’s risk and safeguard the margin benefit provided to you.
Why are the haircuts significantly higher compared to other brokers? There’s more than a 5 percentage points difference for the liquid large cap stocks.
Hi,
- Brokers, including Upstox, may apply higher haircuts than the exchange’s mandated ones based on their own risk assessments. This is why you might see a different haircut value on the platform compared to what is shown in the exchange’s daily margin report. The additional haircut helps mitigate the broker’s risk and safeguard the margin benefit provided to you.
Hi @D_G,
At Upstox, we apply haircuts based on our internal risk assessment, which may sometimes be higher than the Exchange-mandated ones. This is why you might notice a difference in haircut values compared to the exchange’s daily margin report. The additional haircut serves as a risk buffer, ensuring better risk management and safeguarding the margin benefits provided to our users.
These decisions are taken by our RMS team, factoring in various internal parameters to maintain a secure and stable trading environment. Hope this clarifies your doubt, thanks.