Sure. Here is what happened.
Shefeel did not know that in CDS order entry form, you have to enter the no. of lots. By mistake he entered the size of the contract, which is 1000 for 1 lot of USDINR options. He wanted to buy 2 lots of the options which he bought separately within a few minutes. But at both times, instead of entering "1", he entered "1000". So he ended up buying 2000 contracts of the USDINR options. The price per option was about Rs. 240, so he had to pay 240 x 2000 = 4,80,000 + brokerage + service tax , etc = Rs. 5.3 L to the broker. He had executed this trade on friday.
Next day(Saturday) or may be on Sunday, the broker branch manager and some executive came to his house to ask for the margin payment since option contracts require 100% margin. Shefeek did not have that much money in his bank account and he informed the bank officials so. The bank officials suggested that he square-off his positions on monday but insisted that he give them cheques so that they can secure themselves. They also agreed to return the cheques on monday after the position was squared-up. Shefeek squared-up his position on the following monday. But what worried him now was that they were not returning his cheques as agreed. He was afraid that if they try to encash those cheques, he will be guilty in cheque-bouncing case.
Now here is what must have conspired by the bank officials:
They were obviously aware of the fault in their trading system, or any lapse that had caused such a erroneous order to be executed. Now, if any liability had arisen out of it, then broker would have been held responsible for extremely poor risk management. Therefore, they wanted to prove that it was indeed the customer's true intention to buy 2 lots of those option contracts. And therefore, to prove the customer's intention, they persuaded him to write cheques worth Rs. 5.something lakhs. Their logic behind the move is that once the customer has given the cheques, it clearly indicates that customer has entered the trade at his own independent will and accepted the outcome of it. So basically, by getting him to write the cheques, they wanted to de-risk themselves and prevent any fingers from being pointed towards them.
But now as shefeek has closed his position, he will have to pay only the difference between trade size if he has incurred a loss, or the profit(after deducting brokerage, etc) will be credited to his ledger.
Now shefeek wants the cheques back because he is worried about them being bounced. But actually there is no reason to worry for him because now the cheques are not neded at all. He does not owe them any money now. So he has all the rights to stop payment of that cheques.
Shefeel did not know that in CDS order entry form, you have to enter the no. of lots. By mistake he entered the size of the contract, which is 1000 for 1 lot of USDINR options. He wanted to buy 2 lots of the options which he bought separately within a few minutes. But at both times, instead of entering "1", he entered "1000". So he ended up buying 2000 contracts of the USDINR options. The price per option was about Rs. 240, so he had to pay 240 x 2000 = 4,80,000 + brokerage + service tax , etc = Rs. 5.3 L to the broker. He had executed this trade on friday.
Next day(Saturday) or may be on Sunday, the broker branch manager and some executive came to his house to ask for the margin payment since option contracts require 100% margin. Shefeek did not have that much money in his bank account and he informed the bank officials so. The bank officials suggested that he square-off his positions on monday but insisted that he give them cheques so that they can secure themselves. They also agreed to return the cheques on monday after the position was squared-up. Shefeek squared-up his position on the following monday. But what worried him now was that they were not returning his cheques as agreed. He was afraid that if they try to encash those cheques, he will be guilty in cheque-bouncing case.
Now here is what must have conspired by the bank officials:
They were obviously aware of the fault in their trading system, or any lapse that had caused such a erroneous order to be executed. Now, if any liability had arisen out of it, then broker would have been held responsible for extremely poor risk management. Therefore, they wanted to prove that it was indeed the customer's true intention to buy 2 lots of those option contracts. And therefore, to prove the customer's intention, they persuaded him to write cheques worth Rs. 5.something lakhs. Their logic behind the move is that once the customer has given the cheques, it clearly indicates that customer has entered the trade at his own independent will and accepted the outcome of it. So basically, by getting him to write the cheques, they wanted to de-risk themselves and prevent any fingers from being pointed towards them.
But now as shefeek has closed his position, he will have to pay only the difference between trade size if he has incurred a loss, or the profit(after deducting brokerage, etc) will be credited to his ledger.
Now shefeek wants the cheques back because he is worried about them being bounced. But actually there is no reason to worry for him because now the cheques are not neded at all. He does not owe them any money now. So he has all the rights to stop payment of that cheques.
They squared-up that position @0.10 .on monday..officials never told about their technical mistake.they told that it was my mistake..
cheques were obtained by misinformation and they suspended my account.
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