Currency Derivatives
FAQs

a) Why Currency Derivatives

b) Account opening

c) Trading in Currency Derivatives

d) About Currency Futures and trading in Currency Futures at ICICI Securities Ltd (I-Sec)

e) Interest Rate Future

f) Settlement Obligation in Currency Futures

g) About Currency Option and trading in Currency Option at ICICI Securities Ltd (I-Sec)

h) Settlement Obligation in Currency Options

i) Charges

j) Contact Us

a) Why Currency Derivatives? Top

1. What is Currency Derivatives?

The term 'Derivatives' indicates it derives its value from some underlying i.e. it has no
independent value. Underlying can be securities, stock market index, commodities, bullion,
currency or anything else. From Currency Derivatives market point of view, underlying
would be the Currency Exchange rate. Derivatives are unique product, which helps in
hedging the portfolio against the future risk. At the same time, derivatives are used
constructively for arbitrage and speculation too.

2. What are the benefits of trading in Currency Derivatives

Currency Derivatives are very efficient risk management instruments and you can derive
the below benefits:

i. Hedging: You can protect your foreign exchange exposure in business and hedge
potential losses by taking appropriate positions in the same. For e.g. If you are an importer,
and have USD payments to make at a future date, you can hedge your foreign exchange
exposure by buying USDINR and fixing your pay out rate today. You would hedge if you
were of the view that USDINR was going to depreciate. Similarly it would give hedging
opportunities to Exporters to hedge their future receivables, Borrowers to hedge foreign
currency (FCY) loans for interest and principal payments, Resident Indians, who can hedge
their offshore investments.

ii. Speculation: You can speculate on the short term movement of the markets by using
Currency Futures. For e.g. If you expect oil prices to rise and impact India's import bill, you
would buy USDINR in expectation that the INR would depreciate. Alternatively if you
believed that strong exports from the IT sector, combined with strong FII flows will
translate to INR appreciation you would sell USDINR.

iii. Arbitrage: You can make profits by taking advantage of the exchange rates of the
currency in different markets and different exchanges.

iv. Leverage: You can trade in the currency derivatives by just paying a % value called the
margin amount instead of the full traded value.

3. What categories of Currency Derivatives contracts are offered for trading through
ICICIdirect?

Future and Option contracts in Currency derivatives have been introduced in India. Trading
in Currency derivatives through ICICIdirect is presently offered in both Future and Option
contracts in NSE only.

4. What are Currency Futures Contracts?

Currency Futures contracts are legally binding agreement to buy or sell a financial
instrument sometime in future at an agreed price. Currency Future contracts are
standardized in terms of lots and delivery time. The only variable is the price, which is
discovered by the market. Currency Futures contracts have different expiry validity and will
expire after the completion of the specified tenure.

5. Who is eligible to trade in Currency Derivatives?

All Resident Indians as defined in section 2(v) of the Foreign Exchange Management Act,
1999 (FEMA, Act 42 of 1999) are eligible to trade in the Currency Derivatives segment.
For participation by regulated entities, concurrence  from  respective  regulators should be
obtained. Currently, trading facility in Currency Derivatives at I-Sec will be offered to all
Resident Individuals / HUFs / eligible Corporates fulfilling the FEMA criteria.

b) Account Opening Top

1. Do I need to open a new account for trading in Currency Derivatives?

(a) Existing Customers: No, if you are an existing customer and have a 3-in-1
ICICIdirect.com account and your linked ICICI Bank account is more than 6 months old
you activate your account for Currency Derivatives Segment online by accepting the Online
Terms and Conditions for Currency Derivative. If your linked ICICI Bank Account is not
more than 6 months old you can activate your account for Currency Derivative Segment by
submitting the prescribed documentation. To apply for Currency Derivatives please contact
customer care at 24-hour Customer Care Number or you can also write to us
at helpdesk@icicidirect.com We will be glad to assist you further.

(b) New Customers: Yes, all new customers need to apply for a 3-in-1 Account. The
Account Opening Form already includes prescribed documentation for Currency
Derivatives. For further information on how to open a 3-in-1 account, please feel free to
contact any of our 24-hour Customer Care Number. you may also write to us
athelpdesk@icicidirect.com We will be glad to assist you further.

2. Is an existing customer required to submit additional document(s) to begin trading

in Currency Derivatives?

No, if you are an existing customer and have a 3-in-1 ICICIdirect.com account and your
linked ICICI Bank account is more than 6 months old you activate your account for
Currency Derivatives Segment online by accepting the Online Terms and Conditions for
Currency Derivative. If your linked ICICI Bank Account is not more than 6 months old you
can activate your account for Currency Derivative Segment by submitting the prescribed
documentation.

3. What documents would I be required to submit for registering myself in for

Currency Derivatives? Do I need to submit any proofs along with the documents?

(a) Existing customers: If your linked ICICI Bank account is more than 6 months old then
you can activate your account for Currency Derivatives Segment online by accepting the
Online Terms and Conditions for Currency Derivative

(b) New customers: If you are not already a registered customer of I-Sec, you will have to
open a 3-in-1 account with I-Sec. The account opening documentation for the 3-in-1 form
has been consolidated for all product offerings and contains the Currency Derivatives
documentations also. Proof of identity and address, as prescribed, would be required to be
submitted along with the new account opening form.

4. I am an existing customer why do I need to sign and submit additional

documentation for trading in Currency Derivatives?

The additional documentation requirements have been specified by the regulators and as a
broker ICICI Securities Ltd (I-Sec) needs to comply with these requirements.

5. How will I receive the intimation on registration for Currency Derivatives?

You will receive an e-mail once your form has been successfully processed and you are
registered for Currency Derivatives. You will be required to accept the online Terms and
conditions applicable to Currency Derivatives and you can immediately start trading.

 
c) Trading in Currency Derivatives Top

1. How can I start trading in Currency Derivatives?

Once you are registered for Currency Derivatives after completing the below steps: 
. Login into your account with your user id and password, 
. Accept the online "Currency Derivatives Terms and Conditions" and 
. Allocate funds from Modify Allocation link for Currency Derivatives segment
2. On which exchanges can I trade in Currency Derivatives at www.icicidirect.com?

ICICI Securities offers Currency Derivatives trading facility on the National Stock
Exchange of India Ltd. (NSE).

3. What are the trading hours for Currency Derivatives?

Trading in Currency Derivatives through www.icicidirect.com is allowed during the

exchange specified timings. Currently, the trading hours on NSE for Currency Derivatives
are between 9:00 am to 05:00 pm, from Monday to Friday. The Exchanges may alter the
trading hours on any day for any reason that the Exchanges may deem fit.

4. Can I place orders through the Call Centre?

Yes. You can place Currency Derivative orders through our Call Centre by using the Call N
Trade facility.

5. Can I place overnight orders (orders outside market hours) in Currency Derivatives
segment?

Yes. Overnight orders are allowed to be placed in Currency derivatives segment. Only
Limit orders are permitted and such orders will be sent to the exchanges on the next trading
day once the markets open.

6. What are different order types that are available in Currency Derivatives?

You have the following order types in Currency Derivatives:

. Day/Good Till Day orders: Day orders are orders which remain valid only for one
trading session. Any unexecuted order pending at the end of the trading session is expired.
. Immediate or Cancel (IOC orders): IOC order allows the user to buy or sell a contract
as soon as the order is released into the system, failing which the order is cancelled by the
system. Partial match is possible for the order and the unmatched portion of the order is
cancelled immediately.

 
d) About Currency Futures and trading in Currency Futures at
ICICI Securities Ltd (I-Sec)
1. What is Currency Futures Trading at ICICI Securities Ltd (I-Sec)? Top

As a customer of I-Sec, you can now trade in Currency Futures on NSE .

You can take buy/sell positions in eligible underlying currency contracts expiring in
different months. If, during the course of the contract life, the exchange rate moves in your
favor (rises in case you have a buy position or falls in case you have a sell position), you
make a profit. In case the exchange rate movement is adverse, you incur a loss.

2. Which currency exchange rates are eligible for Currency Futures trading? Why is
the stock list restricted to specific currencies exchange rates only?

I-Sec enables currencies for trading in the Currency Futures and Option segment. Only
those currencies which are allowed by the exchanges are made available by I-Sec for
currency Futures and Options trading. Currently, in Future USDINR, EURINR, GBPINR,
JPYINR and in Option USDINR is permitted by the exchange and will be enabled by I-Sec
for trading in Currency Futures and Option segment.

3. How is Currency Futures trading different from Equity Derivatives trading?

Equities Derivatives trading allows you to trade in Stocks and Index. While Currency
Derivatives trading allow you to trade in currencies; currently in USDINR, EURINR,
GBPINR, JPYINR in Future and USDINR in Option. Settlement in both the segments is
presently done in cash.

4. How is the Currency Futures contract defined?

USDINR Future contract expiring on 27 Aug, 2009 is defined as "FUT-USDINR-27-Aug-

2009". Wherein, "FUT" stands for Futures as currency derivatives product, "USDINR" for
underlying currency exchange rate and "27-Aug-2009" for the expiry date.

5. What is an "Underlying" and how is it different than "Contract"?

A Currency exchange rate enabled for trading on futures is called an "Underlying" e.g.
USDINR. There may be various tradable contracts for the same underlying based on its
different expiration period. For example FUT-USDINR-27-Aug-2009, FUT-USDINR-28-
Sep-2009 and FUT-USDINR-28-Oct-2009 are "contracts" available for trading in currency
futures having USDINR Exchange rate as "underlying".

6. When do the Currency Futures contracts expire?

Currency Futures contracts expire two working days prior to the last business day (i.e. Last
trading day at exchange) of the expiry month.
7. How do I place buy/sell order (s) in Currency Futures?

To place Buy/Sell orders in Currency Futures, you will have to do the following:

. Visit the "Place Order" page

. Define the Currency Underlying Code
. Select "Futures" in the "Product" drop down box
. Click on "Select the contract". This will display the whole list of contracts available in the
given Currency code expiring in different months. 
. Select the contract in which you wish to trade
. Click on the "Buy / Sell" link. This will take you to the buy / sell page.
. Define the Order Type i.e. Market or Limit, order validity period eg. Day, Limit Price and
Stop Loss Trigger Price if any.

8. Do I have to pay the full contract value on placing orders in Currency Futures?

No. You will be required to place a certain % of order value as margin, while placing a
buy/sell position in Currency Futures. With Currency Futures trading, you can leverage on
your trading limit by taking buy/sell positions much more than what you could have taken
in the Spot market. However, the risk profile of your transactions goes up.

9. How much margin would be blocked on placing the Currency Futures order? How
is margin blocked?

Initially, margin is blocked at the applicable margin percentage on the order value. For
market orders, margin is blocked considering the order price as the last traded price of the
contract. On execution of the order, the same is suitably adjusted as per the actual execution
price of the market order. The margin is blocked from the available limits under the
Currency Limit page.

10. Is the margin % uniform for all Currencies?

The margin % for currency is displayed on the site under the "Underlying List" page of
Currency. Margin percentage may differ from currency to currency based on the liquidity
and volatility of the respective currency exchange rates besides the general market
conditions. But all future contracts within the same underlying currency would attract same
margin %.

11. Can margin be changed during the life of contract?

Yes, margin % can be changed during the life of the contract depending on the volatility in
the market. It may so happen that you have taken your position at 4% margin. But later on,
due to the increased volatility in the exchange rates, the margin % is increased to 5%. In
that scenario, you will have to allocate additional funds to continue with the open position,
else such position may come in the MTM loop and get squared off because of insufficient
margin. It is advisable to keep higher allocation to safeguard the open positions from being
squared off.

12. Is margin blocked on all Currency future orders?

No. Margin is blocked only on such Currency Future orders, which result into increased
risk exposure.

In case you have placed orders in a near month contract and the middle month contract of
the same underlying, for calculating the margin at order level,value of all buy orders and
sell orders (in the same underlying-group) are added. Margin is levied on the higher of two
i.e. if sum of buy orders is higher than the sum of the sell order value, then all buy orders
will be margined and vice versa.

In other words, margin is levied at the maximum marginable order value in the same
underlying.

For example, you have placed the following buy and sell orders. 

Buy Orders Sell Orders

Contract Details No. of Order No. of Order
Qty Rate Qty Rate
Lots Value Lots Value
FUT-USDINR-27-Aug- 1 1000 45 45000        
2009
FUT-USDINR-28-Sep- 1 1000 49 49000 2 2000 52 104000
2009
FUT-USDINR-28-Oct-         1 1000 40 40000
2009
d) Total 2 2000    94000 3 3000   144000
As explained above, margin is levied on the higher of Buy and Sell Order value. In the
above given example, Sell Order Value is greater than Buy Order Value. Hence margin
would be levied at specified margin % on Rs. 144000.

13. What happens if buy or sell orders are placed when there is some open position
already existing in the same underlying?

If you place a Buy/Sell orders in an Underlying, in which you already have an open
position, margin will be levied as per the following calculations:

. First the Marginable buy/sell order lots will be calculated. 

Marginable Buy Order = Buy Order at Underlying - Open Net Sell Position

Marginable Sell Order = Sell Order at Underlying - Open Net Buy Position

.Marginable buy / sell order value is then arrived as follows .

Marginable Buy / Sell Order Value = Buy / Sell weighted average price * Marginable Buy /
Sell lots

. For Order Level margin, Marginable buy order value and Marginable sell order value
would be compared and margin would be levied on higher of the two.

For example, in the above example there is an open sell position of 1 lot of 1000 qty " FUT-
USDINR-27-Aug-2009". Marginable buy and sell order quantity would be 1 lot of 1000 qty
and 3 lots of 3000 qty respectively. Marginable buy and sell order value would be Rs.
47000 and Rs. 144000 respectively.

14. How is the initial margin (IM) calculated on open position?

The same margin % as applicable for Orders will be levied at position level also. Position
level margin is arrived by applying the IM% on the value of net open position.

For example, you have open buy position in FUT-USDINR-27-Aug-2009 for 1 lot of 1000
qty @ Rs.50 and IM % for USDINR is 5%. In that case, margin at position level would be
1 * 1000 * 50 * 5% = Rs.2500/-.

Benefit of calendar spread margin may also be available to you in case of spread position.

15. What is meant by calendar spread?

Calendar spread means risk off-setting positions in contracts expiring on different dates in
the same underlying.

For example, you take Buy position for 2 lots of 2000 qty in FUT-USDINR-27-Aug-2009
@ Rs.50 and sell position for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 @ Rs.55. 1
lot of 1000 qty buy position in FUT-USDINR-27-Aug-2009 and 1 lot of 1000 qty sell
position in FUT-USDINR-28-Sep-2009 form a spread against each other and hence are
called "Spread Position". This spread position would be levied spread margin % for margin
calculation instead of IM%. In this example, the balance 1 lot of 1000 qty buy position in
FUT-USDINR-27-Aug-2009 would be non-spread position and would attract initial
margin.

I-Sec may, at its discretion, allow Reduced Margin benefits on spread position. I-Sec may
allow such benefit for the spread position between Near month and Middle month contracts
only.

16. How is the margin calculation done in case of calendar spread?

Margin calculation on Calendar Spread is done by applying the Spread Margin % on the
Spread Position Value and then adjusting the amount with the Spread Profit or Loss to
arrive at spread margin. If the amount calculated as per the above calculations is a negative
figure, spread margin would be "0".
Spread position value is calculated by multiplying the spread position quantity with the
weighted average price of position in far month contract.

In the above mentioned example, margin position of 1 lot of 1000 qty in FUT-USDINR-27-
Aug-2009 will be subjected to IM% and 1 lot of 1000 spread position quantity would attract
spread margin %. However, you will be able to view only overall margin figure on the open
position page.

Assuming IM and spread margin at 5% and 2% respectively, overall margin on the Spread
position will be calculated as follows:

(a) Spread Margin = (Lot*qty per lot*rate*spread IM%) ± Spread Loss/Profit

Or
"0" whichever is Higher

Spread Loss/Profit = (Sell Price - Buy Price of the spread contracts) * No. of lots forming
spread * Qty per lot
                                   = (55-50) * 1 *1000 = 5000 Profit

Spread Margin = (1*1000*55*2%) - 5000) or "0" (Whichever is higher)

Spread Margin = Rs (- 3900) or 0 (Whichever is higher)

Spread Margin = 0

(b) Non-Spread Margin

1*1000*50*5%

Rs. 2500

(c) Overall Margin

a+b

Rs. 2500

17. Can spread position be formed among all the contracts in existence?

I-Sec would decide the contracts, which can form spread positions against each other. Only
those contracts, which meet the criteria on liquidity and volume will be considered for
spread positions. Technically, the currency exchange rates having low impact cost are
included in spread definition. Margin is calculated and displayed separate for spread and
non-spread contracts.

Let's assume that FUT-USDINR-27-Aug-2009 and FUT-USDINR-28-Sep-2009 are

included in spread definition and FUT-USDINR-28-Oct-2009 is kept out of spread
definition. If you take buy position for 2 lots of 2000 qty in FUT-USDINR-27-Aug-2009
and sell position for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009, 1 lot of 1000 qty buy
position and 1 lot of 1000 qty sell position would form spread. If you take buy position for
2 lots of 2000 qty in FUT-USDINR-28-Sep-2009 and sell position for 1 lot of 1000 qty in
FUT-USDINR-28-Oct-2009, it will not form spread and margin at IM% would be levied on
both 2 lots (2000 qty) buy and 1 lot (1000 qty) sell position.

Similarly at order level, if you place buy order for 1 lot of 1000 qty in FUT-USDINR-27-
Aug-2009 and sell order for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009, order having
larger value would be margined. If you place buy order for 1 lot of 1000 qty in FUT-
USDINR-28-Sep-2009 and sell order for 1 lot of 1000 qty in FUT-USDINR-28-Oct-2009,
both buy order and sell order would be margined at IM% as they would not form spread.

Contracts will be removed from the spread benefit 1 working day prior to the expiry
of the near month contract.

At this stage the client will have to provide complete margin required on the positions taken
in the near month contract (expiring one) as if it were not a contract forming a spread
position. If limit is found insufficient to cover the enhanced margin amount, then the
position may come into the intra day MTM loop and may get squared off due to margin
shortfall.

18. What is meant by 'squaring off ' a position? What is a cover order?

Squaring off a position means closing out a Currency Future position.

The order placed for squaring off an open position is called a cover order.

For example, if you have currency futures buy position of 5 lots of 5000 qty USDINR
expiring on 27th Aug 2009, squaring off this position would mean taking sell position in 5
lots of 5000 qty USDINR expiring on 27th Aug 2009 on or prior to 27th Aug 2009.

19. How do I place a square off order to close my open positions?

You can place the square off order either through the normal buy/sell page or through a
hyper link "Square off" provided on the "Open Position" page.

20. Can an underlying be disabled from trading during the day?

I-Sec may, at its sole discretion, disable any particular underlying during the day from
further trading under the facility.

21. Can I square off the open positions in the disabled underlying?

Yes, you can square off the open positions in the disabled underlying through square off
link available on open position page.

22. I have placed the square off order. Can I modify that order?
Yes. You can modify the square off order until it is not fully executed.

23. How is the profit or loss recognized on execution of square off (cover) orders?

Profit/Loss on execution of square off orders is calculated by comparing the execution price
of cover order with:

. The weighted average price at which the position was built up in case the position was
built during the day

. The previous trading day EOD MTM price (as shown in the "Open Positions - Futures"
table) in case the position has been carried forward from the previous day.

For example, say you have a futures position - 'Buy 2 lots of 2000 qty USDINR' in contract
FUT-USDINR-27-Aug-2009 at an average price of Rs. 50 created through the execution of
two orders - 'Buy 1lot of 1000 qty @ Rs. 48 ' and 'Buy 1 lot of 1000 qty @ Rs. 52'. If you
square off a part of the position by selling 1 lot of 1000 USDINR @ Rs. 53, the profit on
such square off would be calculated as:

Quantity squared off * (Execution price of Square off transaction - Weighted Average Buy
price of the position)

1*1000 * (53 - 50) = 3000

24. How can I square off an open position which is part of spread position when I do
not have enough trading limits to place a cover order?

In case you have a Spread Position and wish to square off the positions, you will be allowed
to place cover orders independently for each position one by one only if you have sufficient
margin to meet the Initial margin requirements of the position which remains open after one
of the position has been squared off.

In case you do not sufficient margin as required above, you will have to square off both
Buy as well Sell position that are forming spread position. Facility to place such an orders
is available in Open Positions page against the respective net position at underlying - group
level in the form of a link called "Joint square off". This joint square off link is different
than square off link available against each contract position. On clicking the same, position
in all contracts within spread definition would be displayed. You can then specify the
quantity for any two positions. One has to be buy and other should be sell. Your square off
orders will be placed at Market Rates.

25. When do you release the margins blocked on Currency Future positions?

Margins blocked on a position are released only after the Currency Future positions are
squared off.

Net amount, after considering the following, is released:

. Margin blocked on Positions
. + Add margin
. +/- Profit/Loss incurred on Square off
. - Applicable taxes.
26. How does my limit get impacted whenever a buy/sell order is executed?

If the Buy/sell order placed by you is a fresh order (i.e. an order which would result into
building up an open position), on execution of the order, the margin blocked at the time of
order placement gets appropriately adjusted for the difference, if any, in the order price at
which the margin was blocked and the execution price. Accordingly the limits are adjusted
for differential margin.

If the Buy/sell order placed by you is a cover order (order which would result into square
off of an existing open position), on execution of the order, your Limits would be adjusted
for the following:

. Release of margin blocked on the open position so squared up

. +/- Profit/Loss incurred on Square off
. - Applicable taxes.
If the Buy/Sell order placed by you results into building a spread position, on execution of
the order, your Limits would be increased with the amount of differential margin released.

For example, you are taking an open buy position for 1 lot of 1000 qty in FUT-USDINR-
27-Aug-2009 @ Rs 50 and IM is 5%. Rs 2500/- would be blocked as an initial margin.
Thereafter, you take a sell position for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 @
Rs 55 and spread margin is 2%. Hence the execution of FUT-USDINR-28-Sep-2009 order
is resulting into spread position. As explained above, margin required would be max(0,
(1*1000*55*2% - (55-50)*1*1000)) = Max(0,(1100 - 5000)) = 0. Hence the excess margin
of Rs 2500/- (2500-0) would be released and added into your currency trading limits.

Continuing the above example, if you place a sell order for 1 lot of 1000 qty in FUT-
USDINR-27-Aug-2009 @ 51, margin of Rs. 2550/- would be required to place this order.
This margin would be required despite being a cover order to square off the open position
in the same contract. Reason for the same is that the order now being placed by you would
result into the increased risk exposure since the buy position of 1 lot of 1000 qty in FUT-
USDINR-27-Aug-2009 has already been considered as position building up spread
position. If buy position of 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 is squared off,
sell position of 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 @ Rs 55 would become
non-spread position and subjected to margin at 5 % IM.

27. How can I view my open positions in Currency Futures?

You can view all your open Futures positions by clicking on "Open Positions" and
thereafter selecting "Futures" as product. The futures positions table gives details such as
underlying, contract details, buy/sell position, Lots (no. of contracts), quantity, Buy order
lots, Sell order lots, Base price, Last Traded Price (LTP), total margin blocked on open
position and order level margin at underlying-group level. Positions in contracts forming
spread and non-spread are shown in separate groups. Contracts forming part of the same
group will form spread against each other.

28. What is Intra -Day Mark to Market? How does I-Sec call for additional margin
during the Intra-day MTM process?

Once the Available Margin falls below the Minimum Margin, I-Sec may, at its discretion
and at a suitable time, run the Intra-day Mark to Market process. Through this process, the
system would block additional margin required out of the Limits available, if any.

In case there are no Limits available, the Intra-day Mark to Market process would cancel all
pending orders for the underlying group and if still there is additional margin required, the
process would square off the positions for which Available Margin is below the Minimum
Margin and there exists a margin shortfall.

29. What is meant by Minimum Margin?

Minimum Margin is the margin amount on a particular position that you should ensure to
maintain with I-Sec at all points in time. If the Available Margin with us goes below the
required Minimum Margin, the I-Sec system would block additional margin required, if the
same is available in the Limits.

30. How do you calculate available margin?

Available margin is calculated by deducting real time MTM loss from margin blocked and
add margin at position level, i.e.

Available Margin = Margin on Positions + Add Margin - MTM Loss

31. How do you calculate Minimum Margin?

Minimum Margin is calculated by taking MM % instead of IM%. For spread position,

Spread minimum margin % would be applied.

32. How do you calculate Additional Margin required when the Available Margin is
below the Minimum Margin required?

In such a case, margin required on an executed position is re-calculated by taking Current

Market Price (CMP) of respective position and IM % or spread margin % as the case may
be. Available margin as calculated above is then compared with the required margin and
amount for Additional Margin amount is arrived at.

For example say you have bought 1 lot of 1000 qty of FUT-USDINR-27-Aug-2009 at
Rs.50 and IM is 5% and minimum margin is 3%. You would be having a margin of
Rs.2500 blocked on this position. The last traded price (LTP) is now say Rs.48. This means
the effective available margin Rs. 500/- which is less than the minimum margin of Rs
1500/- and hence additional margin to be called in for. Additional margin to be calculated
as follows:

(a) Margin available Rs.2500

 
(b) Less : MTM Loss Rs.2000
    (50-48)*1000
 
(c) Effective available margin Rs.500
    (a-b)
 
(d) Minimum Margin (always at Base Price*) Rs.1500
     1000*50*3%
 
(e) Revised margin (always at LTP) Rs. 2400
    1000*48*5%
 
Additional margin Call (e-c) Rs. 1900
* Base Price: During the day it is the Weighted average price of the transactions and if it is
a carried forward position then previous trading days settlement price becomes next trading
days base price which gets adjusted with further transactions on next trading day to arrive at
the weighted average price.

33. How do I check if there is a margin shortfall on any open position?

If available margin on any open position has fallen below minimum margin required on that
position, then available margin amount on such position would be highlighted in red colour
on the Open Positions page indicating that the position may be squared off in the Intraday
MTM process, if additional margin is not allocated.This shall be considered as a margin
call on that position.You are advised to allocate additional margin immediately to meet the
margin shortfall else such position may be squared off by I-Sec. 

Further, please note that the Open Positions page does not refresh automatically. You need
to frequently refresh the page by clicking on 'View' button to view latest details.

34. How do you call for Additional Margin during the Intra-day MTM process?

Once the available margin falls below the minimum margin required, our system would
block Additional Margin required out of the limits available, if any.

35. What happens if limits are not sufficient to meet the Additional Margin
requirements?

Our risk monitoring system/team may, at its discretion, place a square off order at market
rate to close the open position. However, before placing the square off order all pending
currency Futures orders in that underlying-group (contracts having same underlying and
recognized in the same group for spread recognition) are cancelled by our risk monitoring
system/team. Following is the sequence of actions taken by our risk monitoring
system/team.

1. Cancel all pending Futures orders in that underlying-group and see if limits are now
sufficient to provide for additional required margin. If yes, block the additional margin, else
go to step (2).

2. Square off one-one Lot size (i.e. one lot at a time) of the near month contract in that
underlying group and see if limits are now sufficient to provide for additional required
margin. If yes, block the additional margin, else go to step (3).

3. Square off one-one Lot size of the next month contract in that underlying group and see
if limits are now sufficient to provide for additional required margin. If yes, block the
additional margin, else carry on the process in the same way till all the positions in that
underlying group are totally squared off.

However, it is clarified that if, for any reason, the risk monitoring system/team does not
square off the open position even in a situation where the limits are not sufficient to meet
additional margin requirements, it is ultimately the customer's responsibility to square off
the open position on his own, to limit his losses.

Once a position has been created by the customer, he is solely responsible for the profits or
losses emanating from such position. I-Sec is under no obligation to compulsorily square
off any open position and in no circumstances, can be held responsible for not squaring off
open positions or for resulting losses therefrom.

36. What happens if the limit is insufficient to meet a margin call but there are
unallocated clear funds available in the bank account?

While making an online check for available Additional Margin, our system would restrict
itself only to the extent of Currency trading limit (i.e. Allocation) and would not absorb any
amount out of un-allocated funds lying in your linked bank account. This is done so as to
keep your normal banking operations undisturbed. It is, therefore, advisable to have
adequate surplus funds allocated for Currency trading when you have open positions.

However, I-Sec reserves the right to block and/or debit even unallocated clear funds
available in the bank account.

37. Can I do anything to safeguard the positions from being squared off during Intra-
day MTM process?

Yes, you can always voluntarily Add Margin at the time of placing orders or allocate
additional margin, on any open position from the open positions page.

Since the Intra-Day MTM process is triggered when Available Margin is less than the
minimum margin required, having adequate margins can avoid calls for any additional
margin in case the market turns unfavorably volatile with respect to your position.

You can add margin to your position either at the time of placing orders or once the
position is created by clicking on "Modify Margin" link and then do Add margin on the
"Open Position - Futures" page by specifying the margin amount to be allocated further.
However, you should keep in mind that whatever margin you add during the day will
remain there only till the end of day mark to Market (EOD MTM) is run or upto the time
you square off your position in that underlying group completely. Next day if you want
some more margin to be added towards the same open position, you will have to do a 'Add
Margin' again.

38. In case of profit on a Future position or where the Available Margin is in excess of
the Margin Required, can I reduce the margin against the position to increase my
limit?

Yes, you can reduce and release margin against the underlying position to increase your
limit but only to the extent of any excess margin compared to that of required margin (in
case of profitable positions) by accessing he 'Reduce' option given in the 'Modify Margin'
link under the actions column on the open position page. In case the position in the
underlying group is completely squared off then the margin along with add margin amount
will be automatically released by the system.

39. How can I calculate the amount of excess margin that can be Reduced from my
blocked margin to increase my limits for currency trading?

Excess margin that can be reduced is "Add margin or difference between the "Blocked
margin" and the "Total required margin", whichever is less.

Blocked Margin = Margin on position + Add margin, if any

Total required margin is 'current required margin' plus the notional 'mark to market
(MTM) loss' amount, if any.

Current Required margin is the margin calculated at the LTP or the blocked margin on
position, whichever is higher

Benefit for Notional/unrealized profit is not netted off while calculating Required Margin.
Reduce = Lesser of :
"Add margin" OR " Blocked Margin - Total Required Margin"

i.e. Reduce = Min(Max(0,((Margin on position +Add Margin) - Total required margin)),

Add margin)

Total Margin Required = Current Margin Required + Add MTM Loss

Current Margin Required = Max (Margin on Base Price of Position, Margin at LTP)

Reduce margin amount is calculated with the help of below example:

1. There is buy position with Margin on position 700, Add margin 200, Loss 100, Margin at
LTP 590, Required margin on base price of position 700
a. Current Margin required = Max(700, 590) = 700
b. Total Margin required = 700 + 100 = 800
c. Reduce Margin = Lesser of "200" or Max(0,((700 + 200) - 800)) = 100

2. There is a sell position with Margin on position 700, Add margin 200, Loss 100, Margin
at LTP 790, Required margin on base price of position 700
a. Current Margin required = Max(700,790) = 790
b. Total Margin required = 790 + 100 = 890
c. Reduce Margin =Lesser of 200 or Max(0,((700+200) - 890))= 10

3. There is sell position with Margin on Position 4900, Add Margin 500, Profit 1000,
Margin at LTP 9700, Required margin at base price 9800
a. Current Margin required =Max(9800,9700) = 9800
b. Total Margin required = 9800+0* =9800
*Profit are ignored from calculations
c. Reduce Margin = Lesser of 500 or Max(0,((4900+500)-9800)) = 0

40. What is meant by EOD MTM (End of Day - Mark To Market) process?

Daily EOD MTM is a mandatory feature of Currency futures Settlement Process. Every day
the settlement of open Currency futures position takes place at the Settlement Price
declared by the exchanges for that day.

The Base price as shown in the Open Position - Futures page is compared with the
Settlement price and difference is cash settled. In case of profit/loss in EOD MTM, Limits
are increased/reduced by the amount of profit/loss ; net of applicable brokerage, taxes,
statutory levies. The position is carried forward to the Next day at the previous trading day's
Settlement price at which last EOD MTM was run.

Settlement price for all the contracts are provided by exchange after making necessary
adjustment for abnormal price fluctuations. It is different than LTP.

41. Would there be any impact on the margin blocked at position level due to EOD
MTM?

Yes, EOD MTM does have its impact on margin at position level. During the EOD MTM,
margin is re-calculated at the Settlement price for the day and differential margin is blocked
or released as the case may be. For margin calculation, the present IM% and spread margin
% is taken.

To provide sufficient margin on open position after EOD MTM, ensure that sufficient
allocation is available for trading in the Currency segment. You must visit the allocation
amount for Currency on daily basis and allocate further if present allocation is found
insufficient.

Due to daily MTM and payin/payout, allocation amount for Currency may come down over
a period of time and because of the same, open positions may fall in Intra-Day MTM loop
and may get squared off unless you allocate fresh amount for Currency trading. Payin
amount is debited first from the allocation you make for Currency and then from the free
unallocated bank balance. However, Payout credit is given to the linked bank account and
the same is allocated for further trading. Limits will therefore be increased by the amount of
profit, net of applicable taxes, brokerage and statutory levies.

42. What is meant by "Split of Contract"?

One working day prior to the expiry of contract, all open positions forming a spread
position in that contract would be taken out of spread definition and subjected to normal IM
margin %. Position in such separated contracts would be shown separately. Limits would be
reduced appropriately to ensure that IM% on near month contract is also collected. If limits
are falling short to provide the same, the margin available in a group from which the near
month contract was moved will also be utilized to make good the short fall. After moving
the near month contract from the existing group to separate group, margin for the existing
group will be re-calculated after considering spread positions in the new Middle month
contracts and limits would be adjusted appropriately.

For example, you take buy position for 1 lot of 1000 qty in FUT-USDINR-27-Aug-2009 @
Rs.50 and sell position for 1 lot of 1000 qty in FUT-USDINR-28-Sep-2009 @ Rs.49. 1 lot
of 1000 qty buy position and 1 lot of 1000 qty sell position would form spread. At 2%
spread margin, margin blocked is Max(0, ((1*1000*55*2%)-((49-50)*1*1000))) Rs.
2100/-. IM is 5%. Now position in FUT-USDINR-27-Aug-2009 is taken out of spread.
Following would be the margin requirement.
  

a.Limits Rs.
 
20000
b.Margin on FUT-USDINR-27-Aug-2009 - Group A Rs. 2500
  1*1000*50*5%
 
c.Remaining limits Rs.
  (a-b) 17500
 
d.Margin on FUT-USDINR-28-Sep-2009 - Group B Rs. 2450
  1*1000*49*5%
 
e.Remaining limits Rs.
  (c)-(d - 2100) 17150
 
43. Can a non- spread contract be moved to spread group?

Yes, on the expiry of near month contract, far month contract would become the Middle
month contract and would be moved to the spread group. Other contracts along with the
New contract introduced will now be non-spread contracts, being the Far and beyond far
month contracts for the new trading cycle.

44. Is it compulsory to square off the position within the life of contract?

No. You need not square off your position till the contract expires. In that case, I-Sec as
well as Exchange would expire your position on the last day of the contract expiry after
running the EOD MTM. Your position would be closed at the final settlement price as per
the current regulations. The Final Settlement price shall be the Reserve Bank Reference
Rate on the last trading day of such currency derivative contract, or as may be specified by
the relevant authority from time to time. Margin blocked on such expired position will also
be released and added into your trading limits after adjusting profit/loss, applicable
brokerage, taxes and statutory levies on close out.

45. Does the I-Sec system identify trading strategies and provide hedging benefit
between different contracts within Currency Futures underlying?

No. I-Sec does not provide margining benefits on Portfolio or Strategy level. Margins will
be blocked on the individual positions as per logics defined above, irrespective of whether
they form a part of any trading strategy or no. Also square off of positions would be done in
the manner as detailed in the FAQs above. This might lead to squaring off of  positions that
form part of any currency derivative strategy in your portfolio. I-Sec will not analyze your
portfolio while squaring off positions due to margin shortfall. The square off would happen
purely at individual position levels and not at portfolio/strategy level.

Also spread formation and benefit will be at the discretion of I-Sec.

46. Is there any hedging benefit between Currency Futures and Options?

No. Currently ICICIdirect is not offering any hedging benefit between Currency Futures
and Currency Options. Hence customers are advised to monitor all the positions as
independent positions and allocate margin for all individual open positions (if additional
margin is required).

47. What is Reference Price and Exchange Trade Price execution Range for Futures
Contracts?

In order to promote orderly trading, Exchange has prescribed Reference price and
Execution range for Currency Futures and Options contracts. Orders shall be matched and
trades shall take place only if the trade price is within the Trade Execution range based on
reference price of the contract. 

The reference price for each contract shall be the theoretical price based on the underlying
price at market open, and during trade, it would be the simple average of trade prices of that
contract in the last three minutes. For contracts that have traded in the last three minutes,
the reference price shall be revised throughout the day on a rolling basis at one minute
intervals. For other contracts, the reference price shall be the theoretical price based on the
latest available underlying price and shall be revised throughout the day at regular
intervals. 

If any order which is within the operating range but which may result in a trade outside the
execution range is entered then such an order (full or partial as the case may be) shall be
cancelled by the Exchange 

Execution Range for Future Contracts 

The execution range for future contracts with Tenure upto 6 months would be 1% around
the reference price. 
The execution range for future contracts with Tenure greater than 6 months would be 2%
around the reference price.

48. If the Fresh/Cover order gets canceled by Exchange, will I be able to place the
order once again in the same underlying and contract?

Yes. But the order entered should be such that it lies within the reference price and also the
trade execution occurs within the execution range. If these criteria are not met then the
order will be fully/partly cancelled by the exchange.

49. Can my Fresh/Cover order get part canceled by the Exchange?

Yes. Your Fresh/Cover order can get part canceled by the Exchange if part of the ordered
quantity tries to match part opposite order whose price is not within the Trade Price
execution Range. Assume you place a buy fresh order of 2000 quantity at a limit price of
62/-. At the time of Execution of Buy Order, there are two opposite orders finding match of
1000 quantity each at Rs 61/- and 60/-, respectively. The Trade price Execution Range at
that point is Rs 58-60. Such order will be partly canceled (Quantity 1000 at Rs 61/-) and
partly executed (Quantity 1000 at Rs 60/-) by Exchange.

e) What is Interest Rate Future? Top

1. What is Interest Rate Future?

Interest Rate Futures are standardized interest rate derivative contract to buy and sell a
notional security or any other interest bearing instrument at a specified future date, at a
price determined at the time of the contract.

2. Which Interest Rate Future contracts are introduced for trading on

ICICIDirect.com?

Interest Rate Futures Contracts are based on the list of underlying as may be specified by
the Exchange and approved by SEBI from time to time.

3. Where can I view futures contracts and underlying for trading in Interest Rate
Futures?

You can view underlyings for Interest Rate Futures (FUTIRC) contracts on 'Underlying
List' page and contracts can be selected either through the 'Place order' link by entering the
underlying name or by clicking on underlying name through 'Underlying List' page under
Currency segment.

4. Will there be separate market hours to trade in IRF contracts on Currency

Derivatives?

No, you can trade in Interest Rate Future(IRF) contracts during current Currency derivative
market trading hours (Monday to Friday 9:00 A.M. To 05:00 P.M.) only.

5. What is the Expiry Day for the Interest rate Future contracts traded in Currency
Derivatives?

Expiry Date will be the last Thursday of the month. In case the last Thursday is a trading
holiday, the previous trading day shall be the expiry/last trading day. The FUTIRC
contracts shall expire at the normal market closing time on the expiry day or such other
time as decided by Exchange.

6. How much margin would be blocked on placing the Interest Rate Futures order?

Initially, margin is blocked at the applicable margin percentage of the order value. For
market orders, margin is blocked considering the order price as the last traded price of the
contract. On execution, the same is suitably adjusted as per the actual execution price of the
market order. The initial margin percentage can be checked from the "Underlying List" link
under the Currency trading segment. You can check the margin required to create your
position from "Know Your Margin" link under Currency trading segment.

7. Can margin % be revised during the life of the contract?

Yes, margin % can be revised during the life of the contract depending on the volatility in
the market. It may so happen that you have taken your position at 4% margin. But later on,
due to the increased volatility in the exchange rates, the margin % is increased to 5%. In
that scenario, you will have to allocate additional funds to continue with the open position,
else such position may come in the MTM loop and get squared off because of insufficient
margin. It is advisable to keep higher allocation to safeguard the open positions from being
squared off.

8. Is margin blocked on all Interest Rate Future orders?

No. Margin is blocked only on such Interest Rate Future orders, which result into increased
risk exposure. 

In case you have placed orders in a Near month contract and the middle month contract of
the same underlying, for calculating the margin at order level, value of all buy orders and
sell orders (in the same underlying-group) are added. Margin is levied on the higher of two
i.e. if sum of buy order value is higher than the sum of the sell order value, all buy orders
will be margined and vice versa. 

In other words, margin is levied at the maximum order value in the same underlying. 

For example, you have placed the following buy and sell orders. 

Contract Details Buy Orders Sell Orders

 No. of Rat Order No. of Rat Order
Qty Qty
Lots e Value Lots e Value
FUT-883GS2023-23- 200
1 62 124000        
Apr-2014 0
FUT-883GS2023-29- 200
1 65 130000 2 200 62 248000
May-2014 0
FUT-883GS2023-26-Jun- 200
        1 60 120000
2014 0
400 600
Total 2   254000 3   368000
0 0
As explained above, margin is levied on the higher of Buy or Sell Order value. In the above
given example, Sell Order Value is greater than Buy Order Value. Hence margin would be
levied at specified margin % on Rs. 368000.

9. What would be the brokerage payable on Interest Rate Future trades?

The brokerage for Interest Rate Future trades would be the normal brokerage charged
currently on similar lines to that of existing Currency Derivative trades based on your
existing brokerage plan selected by you. You can refer the brokerage schedule on our
website www.icicidirect.com on the path Customer service page>Important
Information>Brokerage. 

To know more about order placement, square off, margin calculation, spread benefits,
MTM etc in Interest Rate Futures (IRF), please click here and refer to the FAQs available
which are similar to currency derivatives.

f) Settlement Obligation in Futures Top

1. What kind of Settlement obligation will I have in Currency futures?

You can have following two Settlement obligations in Currency futures market:

i. Daily Settlement Obligations:

Daily settlement obligations arise due to the following:

. PayOut/PayIn due to Profit and loss on squared off position 
. PayOut/PayIn due to Profit and loss on EOD MTM of open position
. PayIn due to Brokerage and statutory levies
. PayIn due to applicable Taxes
ii. Final Settlement Obligations:

. PayOut/PayIn due to Profit and loss on close out

. PayIn due to Brokerage and statutory levies on close out
.  PayIn due to applicable Taxes
2. Where can I see my Settlement obligation?

You can view your obligations on the "Cash Projections" page. The date on which amount
will be debited from your account or deposited in your account can be checked from the
'Cash Projection' page. You can even see the historical obligation (already settled) by
giving the respective transaction date.

3. When is the obligation amount debited or credited in my bank account?

All Currency futures Daily obligations are settled by exchange on T+1 basis and Final
settlement obligations are settled by exchange on T+2 basis.

Daily Settlement Obligations at I-Sec: This means that any daily obligation arising out of
transactions in futures or EOD MTM on day (T) is settled on the immediate next trading
day. This further means that if you have a debit obligation on day (T), the payment will
have to be made on day (T) itself. Whereas, if you have a credit obligation, amount would
be credited in your account on T+1 day. If T+1 day is a holiday, credit would be given to
your account on the next working day.

Final Settlement Obligations at I-Sec: Your final settlement obligation will be settled in

the same manner as the daily obligations except that your credit obligation will be credited
to your account on T+2 day or on a subsequent working day, if T+2 is a holiday.

4. On T+1 day I have payout for a particular trade date and also payin for different
trade date? Will payout and payin run separately ?

No, if different payin and payout are falling on the same day, amount would be first
internally adjusted against each other and only net amount would either be recovered or
paid. In cash projection, distinct particulars would be given for payin/payout internally
settled and settled by way of debit/credit in bank and setting Trading Limits.

5. I have allocated funds for secondary market- Equity and F&O. Can I make use of
those limits for Currency market also?

Allocation has to be done separately for Equity, Equity Derivatives (F&O) and Currency
market. If you have allocated some funds for Equity and F&O, you will get corresponding
trading limits only in these products separately. For trading limits in Currency, you will
have to make necessary allocation separately under the Currency segment on the "Modify
Allocation" page.

g) About Currency Option and trading in Currency Option Top

at ICICI Securities Ltd (I-Sec)
1. What is Options Trading at ICICIdirect.com?

As a customer of ICICIdirect, you can now trade in Currency Options on NSE. It comes
with a comprehensive tracking cum risk management solution to give you enhanced
leveraging on your trading limits.

You can take buy/sell positions in USDINR currency contracts expiring in different months
with various Strike Price. If, during the course of the contract life, the exchange rate moves
in your favor (rises in case you have a buy position or falls in case you have a sell position),
you make a profit. In case the exchange rate movement is adverse, you incur a loss. To take
the buy positions on index/stock options you have to pay certain premium. To take the sell
position in currency options, you have to place certain % of order value as margin. With
options trading, you can leverage on your trading limit by taking buy/sell positions much
more than what you could have taken in cash segment. However, the risk profile of your
transactions goes up.

2. What is a Call?

Call is the Right but not the obligation to purchase the underlying Asset at the specified
strike price by paying a premium.

The Buyer of a Call has the Right but not the Obligation to Purchase the Underlying Asset
at the specified strike price by paying a premium whereas the Seller of the Call has the
obligation of selling the Underlying Asset at the specified Strike price.

3. What is a Put?

Put is the Right but not the obligation to sell the underlying Asset at the specified strike
price by paying a premium.

The Buyer of a Put has the Right but not the Obligation to Sell the Underlying Asset at the
specified strike price by paying a premium whereas the Seller of the Put has the obligation
of buying the Underlying Asset at the specified Strike price.

4. What is a strike Price?

It is the Price at which the underlying asset is agreed to be bought or sold.

5. What is a premium?

Premium is the down-payment which the Buyer of Call Option or Put Option is required to
make for entering the options agreement.

6. What is a European option?

These options give the holder the right, but not the obligation, to buy or sell the underlying
instrument only on the expiry date. This means that the option cannot be exercised early.
Settlement is based on a particular strike price at expiration. Currently, in India Currency
Options is European in nature.

7. What is an American Option?

These options give the holder the right, but not the obligation, to buy or sell the underlying
instrument on or before the expiry date. This means that the option can be exercised early.

8. On which exchanges will I be able to buy and sell in Options market?

Currently, ICICIdirect offers Currency Derivative Options trading facility on the National
Stock Exchange of India Ltd. (NSE).

9. How is Options trading different from Futures trading?

In case of Futures the Buyer has an unlimited loss or profit potential whereas the buyer of
an Option has unlimited profit and limited downside. Similarly the Seller of a Futures has
an unlimited loss or profit potential whereas the seller of an option has a limited profit but
unlimited downside.

10. How is Options Contract Defined?

USDINR Call Option contract expiring on 26 Aug 2014 with strike price of 60 is described
as OPT-USDINR-26-Aug-2014-60-CE

Similarly USDINR Put Option contract expiring on 26 Aug 2014 with strike price of 60 is
described as OPT-USDINR-26-Aug-2014-60-PE

OPT denotes Option, USDINR is the underlying, 26 Aug 2014 is the expiry date of the
contract, 60 is the strike price, CE denotes it is a European Call option and PE denotes it is
a European Put option

11. Which contracts under an underlying are enabled for Options trading? Why is the
contract list restricted to specific contracts only under various underlyings?

ICICIdirect enables selected contracts under various underlyings for trading in the Options
segment. Only those contracts, which meet the criteria on liquidity and volume are
considered for Options trading. This is required as there may be a risk of lower liquidity in
some contracts as compared to active contracts. As a result, your order may only be
partially executed, or may be executed with relatively greater price difference or may not be
executed at all. Thereby to safeguard your interest such illiquid contracts are disabled for
trading on www.icicidirect.com. The list of contracts is subject to modification by
ICICIdirect from time to time.

12. Can an enabled contract be disabled later ?

Yes, it is possible that ICICIdirect disables a contract that was enabled earlier. This could
happen due to various reasons like the underlying is disabled from Exchange.
13.Can I square off my position once the contract is disabled?

Yes, you can square off your open positions using the square off link on the Open Positions
page when the contract is disabled for trading.

14. Where can I view Options contracts?

When selecting any contracts, only enabled contracts will be displayed for trading on the
website. Contracts can be selected from either 'Place order' link or 'Underlying list' page on
www.icicidirect.com.

15. Would Different Margin percentage be applicable to different Underlyings?

Currently only USDINR underlying is enabled for option trading but yes, after introduction
of more underlyings ICICIdirect.com would levy different margin percentages on different
underlyings depending on market volatility as it feels is necessary for Risk mitigation.

16. Can margin be changed during the life of contract?

Yes, margin % can be changed during the life of the contract depending on the volatility in
the market. It may so happen that you have taken your position and 5% margin is taken for
the same. But later on due to the increased volatility in the prices, the margin % is increased
to 6%. In that scenario, you will have to allocate additional funds to continue with open
position.

17. How is margin (premium) calculated on Buy orders in Option?

Buy orders irrespective of whether it is a Call or a Put, is margined only to the extent of the
Premium payable on the order. For e.g. If you place a Buy order in OPT-USDINR-26-Aug-
2014-60-CE for 10000 (10 Lots) quantity at a Limit price of 0.8525 would attract margin of
Quantity * Price at Rs 8525/-.

18. How is Margin calculated on Sell orders in option?

Since the seller of the option is exposed to a higher risk than the buyer of an option, the
margin calculation is slightly different as compared to Buy orders. ICICI direct would
specify a Initial Margin percentage as it feels is commensurate with the volatility and the
current position of the underlying. This percentage would be applied to the Current Market
Price (CMP) of the Underlying.

19. Would In-the-Money or Out-of-the-Money be considered for Initial Margin

calculation in case of Sell Orders?

Yes, In-the-Money or Out-of-Money would be considered while calculating the Margin on

Sell orders. In case of In the Money, the seller of the option would be required to bring in
additional amount equal to the difference between CMP and the Strike price in case of Call
and difference between Strike price and the CMP in case of Put. In case of Out of money,
the seller of the Option is given the benefit and would be required to bring in lesser amount
equal to difference between Strike price and the CMP in case of Call Option and difference
between CMP and the Strike price in case of Put Option. The formulaes are as follows: 

Additional Amount required:

In-the-Money Call: (C.M.P. - Strike Price) * Quantity

In-the-Money Put: (Strike Price - C.M.P.) * Quantity

Out- of-the- Money Call Benefit: (Strike Price - C.M.P) * Quantity

Out- of - the- Money Put Benefit: (C.M.P. - Strike Price) * Quantity

The Initial Margin so arrived is compared with a Minimum Margin (SOMC margin) i.e the
Short option margin Percentage, the higher of the two margins is taken into account.

20. Would the Premium to be received be considered for Marginable sell orders?

No, Premium benefit will not be given at the time of placing Marginable sell orders. 

Once the order is executed the benefit of the Premium is withdrawn since the Premium is
now a crystallized entry for which you would get the Payout on the Indicated payout date.
Now the entire margin amount is blocked from the limits. The following Illustration shows
how margin is calculated on sell orders (Applicable to both Call and Put orders) 

You place a sell order in OPT-USDINR-26-Aug-2014-60-CE, for 5000 quantity at a limit

price of 0.9925/- 

Current Market price of USDINR is 58. 

Initial margin on USDINR is 10%. 

The Seller is Out-of-the-Money in this case and the seller gets benefit of this. 

(a) Margin = Qty * (CMP * IM% - (Strike Price - CMP) 5000 * (58*10% - (60-58)) = Rs
19000 

Margin on Order would be = Rs 19000

21. Is the separate Margin Blocked for Buy and Sell Orders?

No, margin is blocked on the order which attracts higher Margin out of the Buy or Sell
order. 

If you have placed both a buy and sell order in the same contract Margin blocked would be
the maximum of the two orders. 

Illustration 
As in the above illustration the sell order attracts a margin of 

(a) Rs 19000/-. 

If you place a Buy order in the same Contract OPT-USDINR-26-Aug-2014-60-CE 5000 at

Rs 0.9925/- it would attract margin of 

(b) Rs 4962.5/-. 

Margin blocked would be the higher of the two margins (a) or (b) i.e. Rs 19,000/-. 

22. Is margin blocked on all Options Orders?

No. Margin is blocked only on orders, which result in an Increased Risk exposure. Margin
is not recovered from an order, which is cover in nature. However in case of buy cover
order where the premium exceeds the margin blocked, extra margin is required for placing
the order. If a Position of opposite nature is present then the Order is reduced by the
opposite position, if the opposite position is greater than the order, then the order is not
margined at all. For e.g. 

a) if you have a Buy position of 5000 in OPT-USDINR-26-Aug-2014-60-CE, and you

place a sell order of 4000 then the sell order becomes non-marginable. 

b) If you have a sell position in OPT-USDINR-26-Aug-2014-60-CE, and the margin

blocked is Rs.19000 and a cover buy order is placed which requires total premium of
Rs.21000.00, then extra margin to the extent of Rs. 2000.00 (21000-19000) is required.

23. What happens if buy or sell orders are placed when there is some open position
also in the same contract?

In both cases buy and sell, the Marginable Buy order or Marginable Sell order is arrived at
the Contract level. Marginable Buy order is calculated by deducting Net Sell Position from
the Total Buy orders 

Marginable Sell order is calculated by Deducting Net Buy Position from the Total Sell
orders 

Margin is recovered only on the Marginable Buy/Sell order Quantity.

24. How do I place a square off order to cover my open positions?

You can place the square off order either through the normal buy/sell page or through a
hyper link "Square off" on the "Open Position" page. It is advisable to place cover order
from open positions page through the "square off" link since the lots available are displayed
on the Square-off Order Placement page and you are aware of the lots for which you are
placing the square off.
25. Can I Exercise My Buy (Call/Put) Option?

No you cannot exercise your Buy options since currently in India Currency Options are
European in nature. 

In case of European Options the contracts can be exercised only on the last day of the
contract expiry. All In the Money European contracts will be automatically exercised by the
exchange on the last day of contract expiry, hence there will be no additional option for
exercising on www.icicidirect.com. 

In case of an American option you can place an exercise request upto the Open (Call/Put)
buy position anytime except on the Last date of the contract expiry.

26. What is Exercise ?

On expiry date of an option contract, all in-the-money positions are exercised by exchange.

27. Is there a specific time when I can place my exercise request?

Currently in India, Currency Options are European in nature thereby you don't have the
option to place exercise but they will be auto exercised on the expiry date if they are In-the-
Money.

28. What is the Effect of Exercise?

The profit on exercise is reflected in the Cash Projections and is added to the Limits. The
realized profit on the contract is also reflected in the Portfolio page.

29. How is Profit calculated on Exercise?

In case of Exercise the profit is calculated as the difference between the Exercise
Settlement price of the Underlying and the Strike price of the contract. This is then
multiplied by the exercised quantity and reduced by the applicable statutory levies and
taxes.

30. Is exercise quantity considered for Margin calculation?

Yes, the exercised quantity is reduced from the open positions in the Marginable sell order
quantity calculation. Hence the sell order placement would be marginable if the quantity of
sell order exceeds the difference between the executed Buy position and the exercise
request quantity i.e. Sell order Qty is greater than (Buy Position Qty - Exercised Qty).
However, currently all Currency Option contracts are European in nature and exercised on
Expiration of the contract.

31. Is part exercise possible by the exchange?

No, only full quantity will be exercised by exchange.

32. What is assignment?

In case you have a Sell position, you may be assigned the contract i.e. you will have to Buy
the Underlying in case of Put. However since options are currently cash settled you would
have to pay the Money 

On expiry date of an option contract, all out-of the-money short positions are assigned by
exchange.

33. How do I know I have been assigned?

The Assignment book will reflect the assigned quantity in the contract along with the
settlement price. The loss on assignment is reflected in the Cash Projections and is reduced
from the Limits. The realized loss on the contract is also reflected in the Portfolio page.

34. Do I have any control over Assignment?

No, You have no control over Assignment since it is initiated by the exchange.

The Assignment process is completely decided by the exchange.

35. Is there a Daily EOD MTM just like Futures?

No, there is no daily EOD MTM in case of options like in case of Futures.

36. Is MTM done in case of options?

Yes, but it is applicable only in case of Short Positions i.e. Sell Call and Sell Put.

37. What is the Basis of MTM in case of Sell Call and what happens in the MTM
process?

As soon as you place a Sell call order, which results in a position, a Trigger price is
calculated (as per the formula given below) which is displayed in the Open positions book.
Whenever the Underlying price of the currency goes above the Trigger price in case of Sell
Call, the Contract would be in the MTM loop. First the Additional margin is recalculated as
per the new scenario due to price rise is blocked; if Additional margin is found to be
insufficient then the orders in the same contract are cancelled. If both these measures fail,
then the position is squared off by the ICICIdirect.com.

(Strike Price + Margin

   
Amount)
Trigger Price for Sell Call
= -------------------------------------
position
    (1 + Minimum Margin %)
For Example:

You have a sell position in OPT-USDINR-26-Aug-2014-60-CE 

Current Market price of USDINR is 58.

Initial margin on USDINR is 10%.

Initial Margin = (58*10% - (60-58)) = Rs 3.8

Minimum Margin on USDINR is 5%.

Trigger Price for Sell Call Position = (60 + 3.8) / (1+ 5%) = 60.7619

When the USDINR price would rise above 60.7619 the sell position in OPT-USDINR-26-
Aug-2014-60-CE would be in the MTM Loop.

38. What is the Basis of MTM in case of Sell Put and what happens in the MTM
process?

As soon as you place a Sell Put order, which results in a position, a Trigger price is
calculated (as per the formula given below) which is displayed in the Open positions book.
Whenever the Underlying price of the shares goes below the Trigger price in case of Sell
Put, the Contract would be in the MTM loop. First the Additional margin recalculated as
per the new scenario due to price fall is blocked; if Additional margin is found to be
insufficient then the orders in the same contract are cancelled. If both these measures fail,
then the position is squared off by the ICICIdirect.com.

(Strike Price - Margin

   
Amount)
Trigger Price for Sell Call
= -------------------------------------
position
    (1 - Minimum Margin %)
For Example:

You have a sell position in OPT-USDINR-26-Aug-2014-60-PE 

Current Market price of USDINR is 62.

Initial margin on USDINR is 10%.

Initial Margin = (62*10% - (62-60)) = Rs 4.2

Minimum Margin on USDINR is 5%.

Trigger Price for Sell Put Position = (60 - 4.2) / (1 - 5%) = 58.7368

When the USDINR price would fall below 58.7368 the sell position in OPT-USDINR-26-
Aug-2014-60-PE would be in the MTM Loop.

39. How do I check if there is a margin shortfall on any open position?

If the Spot Price of the underlying has breached the Trigger Price of any open position, then
Trigger Price of such position would be highlighted in red color on the Open Positions page
indicating that the position may be squared off in the Intraday MTM process, if additional
margin is not allocated. This shall be considered as a margin call on that position. You are
advised to allocate additional margin immediately to meet the margin shortfall else such
position may be squared off by I-Sec. 

Further, please note that the Open Positions page does not refresh automatically. You need
to frequently refresh the page by clicking on 'View' button to view latest details.

40. If limits are found to be insufficient is the whole position sent for square off in both
cases of sell call and sell put?

No, Square off is done in both cases in lot size of the contract. On acceptance of the square
off placed, the new trigger price is calculated and whole process as explained above for sell
call and sell put is repeated. This goes on till either sufficient margin is available or the
complete position is squared off whichever is earlier.

41. What happens if I do not square off the transaction till the last day?

All "Out of the Money" positions which are not exercised or assigned will be marked as
closed off and the position will not appear in the open positions page. The closed off entry
will appear on the Portfolio Details page as Close out .

42. How is brokerage calculated in case of options?

Brokerage in options is calculated on per lot basis. Please refer Fee schedule on Customer
Service page for more details.

43. Is there any hedging benefit between Currency Futures and Options?

No. Currently ICICIdirect is not offering any hedging benefit between Futures and Options.

44. Is there any hedging benefit between Currency Options?

No. Currently ICICIdirect is not offering any hedging/spread benefit within Currency
Options. Thereby, customers are advised to monitor all the options positions as independent
positions and allocate margin for all individual open Option positions (if additional margin
is required).

45. What is Reference Price and Exchange Trade Price execution Range for Option
Contracts?

In order to promote orderly trading, Exchange has prescribed Reference price and
Execution range for Currency Futures and Options Contracts. Orders shall be matched and
trades shall take place only if the trade price is within the Trade Execution range based on
reference price of the contract. 
The reference price for each contract shall be the theoretical price based on the underlying
price at market open, and during trade, it would be the simple average of trade prices of that
contract in the last three minutes. For contracts that have traded in the last three minutes,
the reference price shall be revised throughout the day on a rolling basis at one minute
intervals. For other contracts, the reference price shall be the theoretical price based on the
latest available underlying price and shall be revised throughout the day at regular intervals.

If any order which is within the operating range but which may result in a trade outside the
execution range is entered then such an order (full or partial as the case may be) shall be
cancelled by the Exchange

Execution Range for Option Contracts 

For option contracts, between Rs.0.0025 to Rs 0.50, there would be a minimum absolute
range of Rs.0.05 around the reference price. 

For option contracts above Rs.0.50 it would be 10% around reference price

46. If the Fresh/Cover order gets canceled by Exchange, will I be able to place the
order once again in the same underlying and contract?

Yes. But the order entered should be such that it lies within the reference price and also the
trade execution occurs within the execution range. If these criteria are not met then the
order will be fully/partly cancelled by the exchange.

47. Can my Fresh/Cover order get part canceled by the Exchange?

Yes. Your Fresh/Cover order can get part canceled by the Exchange if part of the ordered
quantity tries to match part opposite order whose price is not within the Trade Price
execution Range.

Assume you place a buy fresh order of 2000 quantity at a limit price of 0.8900/-. At the
time of Execution of Buy Order, there are two opposite orders finding match of 1000
quantity each at Rs 0.8850/- and 0.8800/-, respectively. The Trade price Execution Range at
that point is Rs 0.7925 - 0.8800. Such order will be partly canceled (Quantity 1000 at Rs
0.8850/-) and partly executed (Quantity 1000 at Rs 0.8800/-) by Exchange.

h) Settlement Obligation in Currency Option Top

1. What kind of settlement obligation will I have in Options?

1. Brokerage: Any Transaction you enter into will attract brokerage. Brokerage is
debited to your account at the end of the day.
2. Premium payable or Receivable
3. Profit on Exercise
 4. Loss on assignment

2. When will the obligation amount be debited or credited in my Bank Account?

Assuming you place a transaction on day T, Options obligation will be settled as per the
following table. 

Obligation
Condition
Settlement
Option Premium
T+1
Receivable
Option Premium Payable T
Exercise Profit T+1
Assignment Loss T
Brokerage T
3. What happens if I have a margin / premium obligation towards the Exchange and
have open position under Options Buy Call and/or Put?

In case client does not have sufficient free limit available in such cases system may even
square off Options Buy positions to recover the required margin / premium obligation
amount towards Exchange.

4. Where can I see my settlement obligation?

You can see your obligation on cash projection page. The date on which the amount is to be
deducted or deposited in your account can be checked from the "Cash projection" page.
You can even see the historical obligation (already settled) by giving the respective
transaction date.

5. On T+1 day I have a payin for a particular trade date and also payout for a
different trade date? Will payin and payout be run separately?

No, if payin or payout falls on the same date, the amount is internally set off and only the
net result payin or payout will be debited or credited to your bank account. 

In cash projection, distinct particulars would be given for payin/payout internally settled
and settled by way of debit/credit in bank.

6. Can I square off the open positions in the disabled underlying?

Yes, you can square off the open positions in the disabled underlying through square off
link available on open position page.

7. I have placed the square off order. Can I modify that order?

Yes. You can modify square off order if not executed.

8. What is meant by a freeze order? What should I do in case an order is Freezed?

Orders in Options may get freezed at the exchange end. There is only quantity freeze (no
price freeze) in case of options. In case of Currency Options the quantity should not be
beyond 10,001.

9. Where can I see that my order is freezed?

The orders in currency options that get freezed appear with a "Freezed" status in the order
book and the details of freeze can be seen in the order log by clicking on the order reference
hyperlink.

10. What should I do in case an order is Freezed?

If your order gets freezed, you can call up the call centre number and provide the required
details about the order. ICICI Securities will inform the exchange about the details of your
freezed order. Exchange may at its discretion release or reject the request for releasing
Freezed orders. Till the order is unfrozen, the limits are blocked to the extent of order
which got frozen.

11. Is there any hedging benefit between options?

No. Currently ICICIdirect is not offering any hedging/spread benefit within Options.
Thereby customers are advised to monitor all the options positions as independent positions
and allocate margin for all individual open Option positions (if additional margin is
required).

i) Charges Top

1. I am a registered customer of I-Sec holding a 3-in-1 account. Do I have to pay any

charges for registering myself for Currency trading?

No.

Customers who do not have an existing 3-in-1 account will have to open a 3-in-1 account
containing the currency derivatives documentation. Normal 3-in-1 account opening fees
would apply for such applicants.

j) Contact Us Top

Call our 12-hour Customer Care Number

you can also write to us directly at helpdesk@icicidirect.com

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