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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services

A client with a Rs 4,00,000 margin deposit holds a position whose initial margin requirement is Rs 3,50,000. Adverse price moves cause a MTM loss of Rs 1,20,000 that is debited to the account. The client states that the margin remaining is enough as the deposit exceeds the requirement. Which statement is correct?

Available margin falls to Rs 2,80,000, which is Rs 70,000 short of the Rs 3,50,000 requirement. The MTM loss of Rs 1,20,000 reduces the Rs 4,00,000 deposit, so the client must top up the shortfall. The initial excess does not remove the obligation.

  1. ANo call is needed because the deposit was initially above the requirement
  2. BAvailable margin is Rs 2,80,000, which is Rs 70,000 short of the requirementCorrect
  3. CAvailable margin is Rs 2,80,000, which is Rs 1,20,000 short of the requirement
  4. DAvailable margin is Rs 5,20,000, so excess exists

Explanation

After the MTM debit, balance = 4,00,000 - 1,20,000 = Rs 2,80,000. Requirement is Rs 3,50,000, so the shortfall is 70,000. Rs 1,20,000 is the loss, not the shortfall; adding the loss gives a wrong sign.

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