TRANSACTION BY CLIENT ON MARGIN

A member may provide broker service to its client on cash account and /or margin account basis. Client who pay in full for the cost of the securities purchased uses cash accounts. Margin is buying securities on credit while using those same or other securities as collateral for the loan. A client is authorized to borrow part of an investment's total purchase cost from their brokerage firm using margin accounts. Brokers have policies and procedures to protect themselves from market risk, as well as credit risk.

As per Margin Rules, 1999 the member in no way extends credit facilities to its client until and unless the client maintains margin account with the broker through a written agreement. The client needs to carefully review the margin agreement provided by broker.

The client shall deposit margin not later than seven days from the first date of securities transaction in the form of cash, securities issued by the Government or its agencies, marginable securities etc. The amount of the initial margin would result in the equity being not less than 150% of the debit balance in the account. Additional margin is required to be deposited if the account falls below 150% of the debit balance. The failure to do so may cause the broker to force the sale of or liquidate - the securities in the client's account in order to bring the account's equity back up to the required level.

The firm must also provide the customer with periodic disclosures informing the customer of transactions in the account and the interest charges to the customer.

Your Risks Involved With Trading on Margin

As a client you may generally use margin to expand your purchasing power. However it also run the risk There are a number of risks that all investors need to consider in deciding to trade securities on margin. These risks include the following:

• You can lose more funds than you deposit in the margin account: A decline in the value of securities that are purchased on margin may require you to provide additional funds to the broker that has made the loan to avoid the forced sale of those securities or other securities in your account.
• The broker can sale of securities in your account: The broker can sell the securities in your account to cover the margin deficiency. You will also be responsible for any short fall in the account after such a sale.
• The broker can sell your securities without contacting you: Some investors mistakenly believe that a broker must contact them for a margin call to be valid. As a matter of good customer relations, most broker will attempt to notify their client but they are not required to do so.
• You are not entitled to an extension of time to deposit the margin: An extension of time to meet initial or additional margin requirements may not be available to you.

Please learn about the risks involved in trading securities on margin, and you should consult your brokers regarding any matters they may have with your margin accounts.