Why did I get an alert on SELFIE/TraderX saying "Due to continuous debit for more than T+6 days in this exchange, only square-off permitted"?

As part of SEBI's Enhanced Supervision guidelines, there are restrictions with respect to granting exposure to clients when there is a debit in their trading account.

The circular states that “Stock brokers shall not grant further exposure to the clients when debit balances arise out of client's failure to pay the required amount and such debit balances continue beyond the fifth trading day, as reckoned from the date of pay-in.”

This implies that when a client fails to clear any debit balance in their account within 6 days from the trade date, as applicable, the broker is not permitted to grant further exposure and is required to block the client's account from the next day (T+1+5).

In this case, it is important to note that:
  • New purchases/derivatives positions will be blocked till the debit is settled.
  • Holdings value cannot be considered as collateral to adjust debits in the case of a debit for more than 6 days.
  • Existing positions can be sold/squared off.
  • Buying under the MTF product is permitted. However, in such cases, the user should not square off the trade on the same day and mandatorily pledge the MTF shares.

For example, Mr. Jacob purchased 100 shares of GAIL at Rs. 150 per share using margins, on Monday (T). He fails to meet his fund obligation of Rs. 15,000 on Tuesday (T+1). As a result, the purchased 100 shares are auto-pledged to Geojit's CUSPA.

He will have time to bring in funds to cover his position till the next Monday (T+1+3). If he fails to do so, Geojit will sell these 100 shares on T+1+4 to recover the debit. Mr. Jacob will be liable to pay any applicable charges and his account will be blocked from the next day (T+1+5) till the debit is settled.

For more information, refer SEBI's Enhanced Supervision Circular.

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