Hi
@RishiKumar, I hope you're doing well & thanks for choosing us. Although we provide higher leverage than many peers, we are known for our prudent risk management practices. There are some option sellers who move from broker to broker purely to sell options on expiry day with HUGE leverage to eat whatever time premium is left in option prices. Usually, they come in significant capital and concentrate their positions in very few symbols. This exposes the brokerage to a black swan event because the brokers' capital is at risk too as they're the ones that enable the leverage over and above exchanged prescribed SPAN. You will be surprised how many big traders got wiped out because of this type of trading. CO/BO are highly leveraged and thus, we avoided giving this to option sellers as they were being heavily used on Thursdays. I hope this is not a deal-breaker for you.
Last year, IL&FS Clearing arm got shut down because of one of their broker, Allied Financial helped a large client to short-sell index options (Or some leveraged Options Sell Trade) to the tune of 350-400+ Crores with extra leverage from ILFS to pocket the options premium. They thought it would be profitable and what happened was that at the expiry, the market went in the opposite direction is what I'm told. The client could not make good the margin calls which started a downward spiral of events. IL&FS
(At the time, it was the largest Clearing Member) shut down because of this mishap as they could not pay up the margin to the exchange and due to this all the brokers that were clearing through IL&FS got locked out of the exchange until they changed their Clearing Member, Allied Financial had to shut down, and everyone got involved in legal battles between the exchange, clearing member & the client who apparently did not allow the pledged securities to be liquidated for margin payments as he claimed the broker had forged his signatures and pledged his holdings without his knowledge or involvement. It's very complicated as everyone has locked horns with each other including the Economic Offences Wing (EOW), SEBI, Exchange, Clearing Member, ILFS and the concerned parties, etc!
All this happened because of overleveraging.
I know this is not relevant but I thought I'd let you know why we are careful with our risk management. It's always better to be safe than sorry. This is my opinion and general principle in life that has translated into our business policies at FYERS.
Disclaimer: What I have said in my message is hearsay, news articles, Court Orders, etc. I encourage readers to do their own research and come to their own conclusions. What's true and what's not is speculation until proven in the court of law.
I hope this helps.
