In the derivatives market, the amount of margin is small relative to the value of the derivatives contract so the transactions are 'leveraged' or 'geared'. Derivatives trading, which is conducted with a relatively small amount of margin, provides the possibility of great profit or loss in comparison with the margin amount and hence transactions in derivatives carry a high degree of risk. You should therefore completely understand the following statements before actually trading in derivatives and also trade with caution while taking into account one's circumstances, financial resources, etc. If the prices move against you, you may lose a part of or whole margin amount in a relatively short period of time. Moreover, the loss may exceed the original margin amount.

• Futures trading involves daily settlement of all positions. Every day the open positions are marked to market based on the closing level of the index / derivatives contract. If the contract has moved against you, you will be required to deposit the amount of loss (notional) resulting from such movement. This amount will have to be paid within a stipulated time frame, generally before commencement of trading on next day.
• If you fail to deposit the additional amount by the deadline or if an outstanding debt occurs in your account, the stock broker may liquidate a part of or the whole position or substitute securities. In this case, you will be liable for any losses incurred due to such close-outs.
• Under certain market conditions, an investor may find it difficult or impossible to execute transactions. For example, this situation can occur due to factors such as illiquidity i.e. when there are insufficient bids or offers or suspension of trading due to price limit or circuit breakers, etc
• In order to maintain market stability, the following steps may be adopted: changes in the margin rate, increases in the cash margin rate or others. These new measures may also be applied to the existing open interests. In such conditions, you will be required to put up additional margins or reduce your positions.
• You must ask your broker to provide the full details of derivatives contracts you plan to trade i.e. the contract specifications and the associated obligations.

• Ensure that you deal with and through only SEBI registered intermediaries.
• Check SEBI registered intermediaries’ certificate number from the list available on the Stock exchanges and SEBI website
• Ensure that you fill the KYC form completely and strike off the blank fields in the KYC form.
• Ensure that you have read all the mandatory documents viz. Rights and Obligations, Risk Disclosure Document, Policy and Procedure document of the stock broker.
• Ensure to read, understand and then sign the voluntary clauses, if any, agreed between you and the stock broker. Note that the clauses as agreed between you and the stock broker cannot be changed without your consent.
• Get a clear idea about all brokerage, commissions, fees and other charges levied by the broker on you for trading and the relevant provisions/ guidelines specified by SEBI/Stock exchanges.
• Obtain a copy of all the documents executed by you from the stock broker free of charge.
• In case you wish to execute Power of Attorney (POA) in favour of the Stock broker, authorizing it to operate your bank and or demat account, please refer to the guidelines issued by SEBI/Exchanges in this regard.

• The stock broker may issue electronic contract notes (ECN) if specifically authorized by you in writing. You should provide your email id to the stock broker for the same. Don't opt for ECN if you are not familiar with computers.
• Don't share your internet trading account's password with anyone.
• Don't make any payment in cash to the stock broker
• Don’t receive funds payout in the form of cash from Stock broker
• Make the payments by account payee cheque in favour of the stock broker. Don't issue cheques in the name of sub-broker/ Authorized Person. Ensure that you have a documentary proof of your payment/deposit of securities with the stock broker, stating date, scrip, quantity in which bank/ demat account such money or securities has been deposited and from which bank/ demat account the transfer has been done.
• Note that facility of Trade Verification is available on stock exchanges' websites, where details of trade as mentioned in the contract note may be verified. Where trade details on the website do not tally with the details mentioned in the contract note, immediately get in touch with the Investors Grievance Redress Cell of the Stock exchange.
• In case you have given specific authorization for maintaining running account, payout of funds or delivery of securities (as the case may be), may not be made to you within one working day from the receipt of payout from the Exchange. Thus, the stock broker shall maintain running account for you subject to the following conditions:
  • Such authorization from you shall be dated, signed by you only and contains the clause that you may revoke the same at any time.
  • The actual settlement of funds and securities shall be done by the stock broker, at least once in a calendar quarter or month, depending on your preference. While settling the account, the stock broker shall send to you a 'statement of accounts' containing an extract from the client ledger for funds and an extract from the register of securities displaying all the receipts/deliveries of funds and securities. The statement shall also explain the retention of funds and securities and the details of pledged shares, if any.
  • On the date of settlement, the stock broker may retain the requisite securities/funds towards outstanding obligations and may also retain the funds expected to be required to meet derivatives margin obligations for next 5 trading days, calculated in the manner specified by the exchanges.
  • You need to bring any dispute arising from the statement of account or settlement so made to the notice of the stock broker in writing preferably within 7 (seven) working days from the date of receipt of funds/securities or statement, as the case may be. In case of dispute, refer the matter in writing to the Investors Grievance Redress Cell of the Stock exchange without delay.
• In case you have not opted for maintaining running account and pay-out of funds/securities is not received on the next working day of the receipt of payout from the exchanges, please refer the matter to the stock broker. In case there is dispute, ensure that you lodge a complaint in writing immediately with the Investors Grievance Redress Cell of the Stock exchange.
• Please register your mobile number and email id with the stock broker, to receive trade confirmation alerts/ details of the transactions through SMS or email, by the end of the trading day, from the stock exchanges.

• In case, a stock broker surrenders his membership is expelled from membership or declared a defaulter; Stock exchange gives a public notice inviting claims relating to the "transactions executed on the trading system" of Stock exchange, from the investors. Ensure that you lodge a claim with the Stock exchanges within the stipulated period and with the supporting documents.
• Familiarize yourself with the protection accorded to the money and/or securities you may deposit with your stock broker, particularly in the event of a default or the stock broker's insolvency or bankruptcy and the extent to which you may recover such money and/or securities may be governed by the Bye-laws and Regulations of the Stock exchange where the trade was executed and the scheme of the Investors' Protection Fund in force from time to time.

• Please note that the details of the arbitration proceedings, penal action and investor complaints against the stock brokers are displayed on the website of the Stock exchange.
• In case your issue/problem/grievance is not sorted out by concerned stock broker/sub-broker then you may take up the matter with the concerned Stock exchange. If you are not satisfied with the resolution of your complaint then you can escalate the matter to SEBI.
• Note that all the stock broker/sub-brokers have been mandated by SEBI to designate an e-mail ID for the grievance redressal mechanism.