Nifty future contract (4)

What Is Nifty Futures Contract?

The Nifty Futures contract is a trading instrument that is based on the National Stock Exchange’s main index NIFTY. This contract is an agreement set in the future to trade in certain pre-fixed units of the NSE-50 index at a fixed price as per the contract.

It is a purely derivative instrument as it is dependent solely on Nifty’s valuation in the stock exchange and is dictated by no other parameter.

How is a contract formulated?

A Nifty Future contract is like a deal that is signed between two parties, wherein, the buyer party promise to buy the traded Nifty futures at a fixed rate on a date in the future from the seller.

If the exchange price of the NIFTY index increases, the seller suffers a loss and the buyer makes a profit. If the valuation of the NIFTY index decreases, the buyer suffers a loss and the seller makes a profit.

The NIFTY futures contract is cushioned by various margins including the SPAN margin and the exposure margin. SPAN (Standardized Portfolio Analysis of Risk) is a method of calculation of the margin amount that should be set aside in your trading account to cover any damage in case you suffer a loss.

The SPAN margin for the Nifty Futures is set at 5% of the value of the Nifty Futures contract. That is, you need to have an extra amount worth 5% of the contract value in your trading account. While the SPAN margin keeps changing with market risks and situation, Exposure margins are usually fixed for all kinds of Future indices.

Exposure margin is an extra margin that is applied on top of the SPAN margin. It is collected as a guarantee to safeguard the investment against unanticipated market changes.

This is done not to burden the broker in case of any losses incurred on an investment. For Nifty Futures, the exposure margin is set at 3% of the value of the contract.

That is if the futures contract is valued at Rs. 10 lakhs, a sum of Rs. 30 thousand will have to be set as the exposure margin.

What do you need to trade in Nifty Futures Contracts? 

 NIFTY Futures contracts do not create any ownership. That is why you don’t necessarily need to open a Demat account to be able to trade in Nifty futures.

You will, however, need a functional derivative trading account with a brokerage firm that is registered with the Securities and Exchange Board of India.

You can trade in a lot (roughly 75 units) of NIFTY indices or you can trade in even a single unit. These contracts can have a maturity period of up to 3 months maximum. Intraday trading in these contracts will result in shorter contract durations.

The SPAN and exposure margins calculated for intraday trading in NIFTY Futures contracts are also somewhat lower for intraday transactions compared to overnight ones and that is why it is a widely popular option among Nifty Futures traders.

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It is, therefore, important to learn both the pros and cons of intraday trading to get a better idea of how this market works and how exactly you can grow your money. In this post, we will walk you through a few advantages and disadvantages of intraday trading. So, keep reading to learn more.

• Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.
• Ensure that pay-out of funds/securities is received in your account within 1 working day from the date of pay-out.
• Be careful while executing the PoA (Power of Attorney) – specify all the rights that the stock broker can exercise and timeframe for which PoA is valid. It may be noted that PoA is not a mandatory requirement as per SEBI / Exchanges.
• Register for online applications viz Speed-e and Easiest provided by Depositories for online delivery of securities as an alternative to PoA.

• Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

• Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: NSE, MCX

• Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

• Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

• Don’t ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

• Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

• Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

• Do not deal with unregistered intermediaries (who are not registered with SEBI/Exchanges).

Names and contact details of all Key Managerial Personnel including Compliance Officer

Sr. No.Name of the IndividualDesignationContact NumbersEmail Id
1 Charanpreet GillCEO/
2 Charanpreet GillWhole Time
3 Charanpreet GillCompliance
4Manpriya GillDesignated
5Kewal GillDesignated

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