Negative Ledger Balance

[Newbie Day-Trader]

As can be seen from the volumes in the following 1 minute chart, MILLIONS of shares were being traded every minute during the fall, so I don't understand why Upstox wouldn't have been able to sell 1000 shares if they had tried but again, it's likely that their RMS failed somewhere. Of course, there would likely have been some slippage in a fast-paced fall but certainly not worth 49k as that would be a slippage of Rs.49 or more, which is unacceptable given the following 1 minute chart where none of the relevant 1minute candles around 414 area (when OP's account would likely have hit Rs.0) are wide enough to justify a slippage of Rs.49 or more, & Rs.366 is WAY too distant. Moreover, if Upstox was supposed to close the position at 70% loss of the original margin, then as OP has said, Upstox's RMS should have issued the closing order around 425-430, & again, Rs.366 is WAY too distant to be accounted for by slippage. So, there's no excuse for Upstox to not have squared off the position a LOT earlier rather than waiting for a loss of -49k.

It may be that IF they took legal action (which I doubt they will since the costs of that might be prohibitive), then they might be eligible to be compensated for the negative balance BUT that won't be in Upstox's interest either since that will only further publicize their RMS failure to even more traders, earning them more negative publicity.

Let me ask. Why is it that only Upstox keeps having this issue of negative balance over & over? (I've already provided links to previous instances) Why didn't other brokers have the same issue on DHFL with their clients? Why didn't other brokers have the same issue during previous instances when other Upstox's clients were hit with negative balances?

 

[superman]

Guess if 2008 repeats, all discount brokers will vanish due to their RMS failures ! Imagine if you have hedge on these brokers who will be responsible to pay you if they go bankrupt

 

[timepass]

The thread starter has gone quiet. I guess there's no more to this topic now.

 

[Newbie Day-Trader]

Discount-broking is the norm in advanced markets like US, & I'm glad India has caught up to some degree over the last few years (though there's a lot to be desired with respect to platforms & other aspects besides lowering trading-costs), so there's nothing inherently bad about discount-broking, ultimately it's a question of having decent people run their companies well, irrespective of their size; just being big doesn't mean a business can't fail, otherwise MFGlobal wouldn't have failed either. Not to mention, the norms for margin-collection are the same for all brokers, & ultimately, set by SEBI. Further, there's Investor Protection Fund that protects investors up to 25 lacs in case a broker goes bankrupt.

 

[superman]

Discount-broking is the norm in advanced markets like US, & I'm glad India has caught up to some degree over the last few years (though there's a lot to be desired with respect to platforms & other aspects besides lowering trading-costs), so there's nothing inherently bad about discount-broking, ultimately it's a question of having decent people run their companies well, irrespective of their size; just being big doesn't mean a business can't fail, otherwise MFGlobal wouldn't have failed either. Not to mention, the norms for margin-collection are the same for all brokers, & ultimately, set by SEBI. Further, there's Investor Protection Fund that protects investors up to 25 lacs in case a broker goes bankrupt.

Investor Protection Fund is a big myth. I hope no one in traderji dreams that Investor Protection Fund can save them if every broker defaults !. It can save only few ! SEBI does not have 25 lakhs * total active traders amount ! Its just like run on bank. you cant save all !

Full brokers are time tested and they have seen 2008. I see in other thread where they say IB asks more margin than SEBI , that due to the fact that they are scared like hell. Kotak charges 400 / lot and they have systems in place to act when shit hits the fan. They have ample profits to cover up RMS Issues. Discount brokers ? Forget it ! - They have not seen 2008 , Zerodha if 2008 happens tomorrow ,wont load for 1 week for sure ! Their profits are razor thin to handle losses due to RMS issues and client defaults !

 

[Newbie Day-Trader]

I can agree with you that it could be that IPF won't be able to cover all traders' losses if there are a lot of traders with huge losses but nonetheless, they might try to come up with some solution because the volumes would probably take a hit if IPF was exposed. Another thing that must be noted that most traders likely have less than 1 lac in their accounts, some maybe tens of thousands of rupees at most, so maybe it won't be that much money anyway, especially if the broker isn't that big.

Anyway, I still can't agree that just because someone is big or has been in the market for a long period, can't fail; again, I believe it's about good management, & management can change over time, companies can not only get better but can also get worse over time, & by that token, your money isn't safe anywhere, not in banks, certainly not in the markets since they can & do crash every now & then, so risks are an inherent part of life, it's just that we all have a different view on which & how much risk we want to take. On the other hand, given that even a lot of profitable traders' edge usually tends to be fairly small, 400/lot is going to eat a LOT into the profits, if not lead an otherwise potentially profitable trader to become a net-looser; so, IF I thought that the choice was between discount-brokers with poor RMS or big brokerages that charge you a fortune every year, & I was also super-concerned about market-crashes, then I'd not trade at all, & I'd just stick to FD's or something (or maybe stuff my money under my bed or in my walls since again, even banks can fail!)

As for IB, I think they'd likely have a good RMS since they are big on automation & backups but it could be that they're simply not used to giving the kind of leverage that we see in India, given that in the US, most people get an intra-day leverage of 4:1 for stocks & 2:1 for overnight trades. Personally, though I'm not at all a fan of IB's margins, I'd rather have them charge more margin than be slaughtered by the exorbitant brokerage of full-service brokers. Not to mention, I've seen a lot of horror-stories of unauthorized trading, exorbitant hidden charges & what not, with clients of Sharekhan & other big brokerage-houses, which is why I only have had accounts with discount-brokers since on the whole, they seem a lot more transparent on those fronts. So again, I don't think full-service brokers are significantly better, they just give us a different set of headaches compared to discount-brokers, so we all have to pick our poison, there's no getting around that.

I don't know how much SEBI focuses on ensuring that brokers have RMS good enough to handle emergency situations (doesn't look like SEBI does enough, otherwise Upstox wouldn't keep on having this issue over & over) but maybe, that's an area where SEBI should be focusing on instead doing stupid things like trying to "protect" retail investors from investing their own money how they want.

 

[sam9494]

Thanks, I was bit busy so not able to check this post.
I have contacted Upstox several times over email and raised ticket. What ever I send their response is same.(Market volatility, RMS Reserves Right)
and asking me to clear dues.

I have not received any proper reason why the square of is done late even after sending multiple emails, So i stopped sending emails.

Can any one suggest me what happens if i don't clear the dues or shall i clear their dues or raise complaint in SEBI.

Whose fault is actually this?.

 

[sam9494]

 

[TraderRavi]

guess with 2008 type volatility many brokers will get wiped out or atleast suffer huge losses with many clients defaulting.