Trading Risk & Derivatives

Why this page is structured this way: The eight pages below answer eight different questions that arrive at a broker’s risk desk from eight different directions — a client asking what happens if they hold a stock option to expiry, a compliance officer asking who monitors a position limit intraday, a finance head asking why pledged collateral produced less buying power than expected. The selector table maps question to page so a reader does not have to read the section linearly. The closing paragraph places this section relative to the broker-side deep dives that already exist.

TL;DR

• Eight topic pages. Four cover derivatives mechanics (settlement at expiry, expiry-day operations, position limits, collateral); four cover the control layer (margin penalties, order-level risk controls, proprietary and employee trading, client protection).
• Client-facing bias. Where a broker-side deep dive already exists — SPAN and margin methodology, short delivery and auction, surveillance measures — these pages cover the client-visible consequence and the servicing workflow, and link rather than repeat.
• Regulatory spine. The 2024–2026 equity-derivatives reform sequence: SEBI/HO/MRD/TPD/P/CIR/2024/132 (Oct 1, 2024), SEBI/HO/MRD/MRD-TPD-1/P/CIR/2025/76 and /2025/79 (May 2025), SEBI/HO/MRD/TPD/CIR/P/2025/ 122 (Sep 1, 2025), and HO/47/15/11(2)2025-MRD-TPD1/ I/4226/2026 (Feb 5, 2026). The 2025 and 2026 instruments in that list are cited by verbatim ID and link to the issuer page: [not yet in index].
• Collateral spine. SEBI/HO/MRD2_DCAP/CIR/2021/0598 (client-level collateral segregation) and SEBI/HO/MIRSD/DOP/CIR/P/2020/28 (margin pledge in the depository system).
• Every page carries a Verified through 2026-09-11 stamp and tags unverified claims explicitly.

Selector

Page	The question it answers	Who reads it	Primary regulatory anchor	Depends on
Exercise, assignment and physical settlement	What happens to a stock future or stock option that is still open at expiry, and what does the client have to fund or deliver?	RMS desk, settlement ops, client servicing	SEBI physical-settlement circulars (2018–2019); NCL/CMPT/55330 net settlement	Delivery margins, demat holdings, debit authorisation
Expiry-day operations	What changes on an expiry day — margins, premium collection, spread benefit, monitoring — and what is the broker’s runbook?	RMS head, OMS owner, operations lead	SEBI/HO/MRD/TPD/P/CIR/2024/132; SEBI/HO/MRD/MRD-TPD-1/P/CIR/2025/76	Contract master, risk-parameter files, client margin statement
Position limits and open interest	How much can one client, one member or the market as a whole hold, and what happens on a breach?	Compliance officer, surveillance desk	SEBI/HO/MRD/TPD-1/P/CIR/2025/79; SEBI/HO/MRD/TPD/CIR/P/2025/ 122	PAN/UCC aggregation, delta feeds, MWPL files
Collateral and cross-margin	Which assets create margin capacity, how much after haircuts, and when does an offsetting position reduce the requirement?	Finance, RMS, back-office	SEBI/HO/MRD2_DCAP/CIR/2021/0598; NCL/CMPT/62978	Pledge confirmations, eligibility lists, allocation files
Margin shortfall and peak margin	How is a shortfall measured against intraday snapshots, and what penalty follows?	RMS, compliance, internal audit	SEBI/HO/MRD2/DCAP/CIR/P/2020/127	Snapshot files, allocation reporting
Order and risk controls	Which pre-trade and intraday controls must sit in front of an order, and what happens when a broker’s systems fail?	OMS/RMS engineering, technology compliance	Kill switch, IRRA and price-band frameworks	OMS limits, exchange APIs
Proprietary, employee and insider-trading policy	What must a broker disclose about its own trading, and how are staff dealings controlled?	Compliance officer, HR, internal audit	Broker regulations; PIT Regulations and structured digital database obligations	Employee registers, PAN mapping
Client protection frameworks	Which client-side safeguards must a broker implement — authentication, verified handles, disclosure documents, voluntary freeze?	Product, compliance, support	2FA and MITC frameworks; SEBI Check; validated UPI handles	Onboarding data, communication stack

How to choose

Start from the event, not the page title.

• A position is open on expiry morning. Read expiry-day operations for the margin and monitoring changes that apply during the session, then exercise, assignment and physical settlement for what happens after the close.
• A client has been told they cannot add a position. The cause is either a position limit (read position limits and open interest) or insufficient recognised collateral (read collateral and cross-margin). These are separate tests and a breach of one is not cured by fixing the other.
• A penalty or a debit has appeared without a new trade. Check whether the cause is a margin shortfall against an intraday snapshot (margin shortfall and peak margin), a delivery margin staged during expiry week (exercise, assignment and physical settlement), or the loss of a spread or cross-margin benefit when one leg expired (collateral and cross-margin).
• Something failed on the broker’s side. Order and risk controls covers kill switch, investor risk reduction access and price-band behaviour; client protection frameworks covers what the client is entitled to see and do.
• An inspection question has arrived. Proprietary, employee and insider-trading policy and position limits and open interest carry the register-and-evidence obligations that inspections test most often.

Two distinctions this section keeps separate

Margin capacity versus position permission. More collateral raises the margin a client can support; it does not raise a position limit. The collateral page and the position-limits page never substitute for each other.

Exchange requirement versus broker policy. Almost every number here has a regulatory floor and a stricter broker overlay. Broker-side figures taken from public policy documents rather than circulars are tagged [industry practice] and attributed. Implement the regulatory obligation; treat the broker figure as an example of how firms set buffers.

How this section relates to the rest of the site

The deep dives already describe the broker’s internal machinery: how SPAN builds an initial margin from a sixteen-scenario grid, how a short delivery becomes an auction, how the surveillance stack stages a stock into GSM or ASM, how client funds are upstreamed to the clearing corporation. This section sits one layer up from that machinery and one layer down from the broker process narrative: it takes the specific derivatives and risk events that a client or a regulator actually asks about and walks them end to end, naming the circular, the file, the screen and the consequence at each step.

Three other layers connect to it. The field atlas carries the field-by-field destination mapping for the computed risk values these pages describe — see the computed margin, computed peak margin and margin pledge sections. The integration DAG places the same steps on a dependency graph, with trading hours covering the intraday loop that expiry-day operations sits inside. The segment rules comparison gives the per-segment baseline — hours, settlement cycle, lot sizes, eligibility — that these pages assume rather than restate.

Finally, activation comes first. A client cannot reach any of these events without the segment being enabled, which is covered in the trading preferences journey screen and in the product-activation section. Read activation before risk if the question is “why can this client not trade this at all”.

Verified through

2026-09-11

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AI-generated and not legal, financial, or compliance advice. See the project README for full disclaimer.