MCX additional margins as a cost of carry

MCX additional margins are the extreme loss margin, additional or ad-hoc margin, tender-period and delivery-period margins, and pre-expiry margin that the Multi Commodity Exchange and its clearing corporation levy on a commodity futures position over and above the SPAN initial margin. They are blocked capital, not a charge: the money is returned when the position is closed or settled. What they cost the trader is the use of that capital for the days it stays locked, a cost of carry rather than a fee on the contract note.

This article treats the additional margins as an economic cost of holding an MCX position rather than as a line item. A trader reading the Zerodha commodity brokerage and charges note will find brokerage, commodity transaction tax , exchange charges and GST as deductions. The margins below are not deductions. They are amounts the clearing corporation requires the trader to keep parked as collateral, and the article explains why they rise sharply as a contract nears expiry and what that does to the return on capital. Every figure carries its source and as-of date; verify against the MCX and clearing-corporation circulars before sizing a position.

The margin stack on an MCX futures position

A commodity futures position carries several margins at once, computed by the clearing corporation on a portfolio basis. The Multi Commodity Exchange clearing corporation uses the SPAN system, the same Standard Portfolio Analysis of Risk engine that governs equity derivatives, and adds layers on top of the SPAN output.

The base layer is the SPAN initial margin, set to cover a worst-case loss on the portfolio over the margin period of risk, which SEBI fixes at a minimum of two days for all commodity derivative contracts (NSE Clearing commodity margin policy, as of 20 June 2026). Above SPAN sit the extreme loss margin and an exposure component, both expressed as a percentage of contract value. These three form the upfront margin that must be in place before the order is accepted.

The remaining margins are not collected upfront. Additional margin, special margin, tender margin and delivery margin fall into the clearing corporation’s “other margins” category, which a broker may collect after the trade and recover any shortfall by the next working day. The distinction matters for the trader because an upfront margin blocks capital at the moment of entry, while a non-upfront margin can appear a day later as the contract moves toward expiry or as the exchange responds to a price shock.

Extreme loss margin

The extreme loss margin (ELM) is a fixed buffer above SPAN that covers the tail risk SPAN does not. It is levied as a percentage of contract value: 1.25 per cent on commodity futures and 1 per cent on commodity options (MCX Clearing Corporation risk-management framework, as of 20 June 2026). Unlike SPAN, which varies daily with volatility, the ELM percentage is stable, so it behaves like a predictable add-on to the initial margin.

For a gold futures contract with a contract value of Rs 75,00,000, the ELM at 1.25 per cent is Rs 93,750, blocked in addition to whatever SPAN demands. That amount is not spent. It sits as collateral and is released when the position is closed. The cost to the trader is the return foregone on Rs 93,750 for the holding period. At a 7 per cent annual opportunity cost, holding that ELM block for a fortnight costs roughly Rs 252 in foregone yield, a number that scales with both the contract value and the days held.

ELM is the simplest of the additional margins to model because it does not change through the contract’s life. It is the floor of the “extra” stack, present from entry to exit, and it is the reason the upfront margin on a commodity future is meaningfully higher than the SPAN figure alone.

Additional and ad-hoc margin

The clearing corporation can impose an additional or ad-hoc margin on specific commodities when price volatility, position concentration, or a global event raises risk on that contract. Crude oil margins were raised sharply in 2020 when the underlying touched negative prices on the international benchmark, and pre-expiry margins on cash-settled contracts deemed susceptible to near-zero or negative prices are now levied during the last five trading days before expiry, increasing by 5 per cent each day (NSE Clearing commodity margin policy, as of 20 June 2026).

An ad-hoc margin is the least predictable of the additional margins. It can be announced intraday and applied the same evening, blocking more capital on an existing position without any action by the trader. A position that was comfortably margined in the morning can show a margin shortfall by the close because the exchange raised the additional margin on that commodity. This is why an MCX trader running a position close to the available collateral risks a shortfall penalty not from a loss but from a margin revision.

Tender period and pre-expiry margin

The tender period and pre-expiry margin is the additional margin that ramps up as a contract approaches expiry. The clearing corporation levies it on open futures positions starting a few working days before the contract expires, because the contract may proceed to physical settlement and the risk of a delivery default rises. The margin increases gradually in 5 per cent daily steps over the pre-expiry working days and applies on both the buy and the sell side (NSE Clearing commodity margin policy, as of 20 June 2026). On MCX the tender period for most contracts begins about five trading days before the contract lapses.

The effect is a steepening margin curve in the final week. A position that needed, say, 12 per cent of contract value in total margin during normal holding can need a further 25 per cent or more by the day before expiry as the 5 per cent daily increments stack. For a Rs 75,00,000 gold position, a 25 per cent pre-expiry add-on is Rs 18,75,000 of extra blocked capital that did not exist a week earlier. A trader who sized the position against the normal-holding margin and intended to ride it to expiry can face a shortfall purely from the pre-expiry ramp, with no change in price.

For options, the pre-expiry margin applies to long and short call and put positions that are in-the-money and close-to-money near expiry, where the risk of an exercise leading to a futures delivery position is highest.

Delivery period margin

A futures position carried into expiry on MCX in a contract that settles by physical delivery enters the delivery process, and the clearing corporation levies a delivery margin on the participant who will give or take delivery. The delivery margin is a percentage of the contract value, distinct from the margins charged during the holding period, and it secures the obligation to deliver the commodity or to pay for and lift it.

Most retail MCX participants never reach this stage because they close or roll the position before the tender period. A trader who intends only to take a price view on gold or crude oil, with no interest in warehousing physical metal or barrels of oil, treats the onset of the tender period as the deadline to exit. Carrying a position into delivery is a deliberate choice that brings warehouse, assaying, and logistics considerations far beyond the scope of a margin calculation, and the delivery margin is only the first of those costs.

Worked example: margin escalation near expiry

Consider a long position in one lot of MCX gold futures with a contract value of Rs 75,00,000, held through to the final week before expiry. The margin sequence below uses illustrative percentages consistent with the framework above; verify the live SPAN file and the contract’s tender schedule before trading.

The blocked capital triples over five trading days, from Rs 9,00,000 to Rs 27,75,000, with no change in the gold price. A trader who funded the position to the normal-holding requirement of Rs 9,00,000 and did nothing would see a margin shortfall by the tender period, attract a shortfall penalty, and face forced reduction of the position. The lesson is operational: a commodity future is cheap to hold in the middle of its life and expensive to hold into expiry, and the cost is measured in capital locked, not in a fee.

Why this is a cost of carry, not a fee

None of these margins is debited as a charge. ELM, additional margin, tender and delivery margins are returned in full when the position is closed or the obligation is met. They do not appear on the contract note as a cost the way exchange transaction charges , commodity transaction tax , or the SEBI turnover fee do. What they cost is the carry: the return the trader could have earned on the blocked capital had it been free, plus the risk that a margin revision forces an unplanned exit.

For a trader who funds positions from idle cash, the carry cost of additional margins is the foregone money-market yield on the blocked amount for the days held. For a trader using pledged collateral, the carry cost is the haircut and pledge charge on the securities tied up. Either way, the additional margins raise the effective cost of holding an MCX futures position into its final week, and a position sized without accounting for the pre-expiry ramp can become unfundable through no fault of the price view. This is distinct from the actual charges in the Zerodha commodity brokerage note, and from SPAN margin on equity derivatives, where physical delivery does not arise and the pre-expiry margin dynamics differ.

See also

• Zerodha commodity brokerage and charges
• Multi Commodity Exchange
• SPAN margin
• Extreme loss margin
• Commodity transaction tax
• Exchange transaction charges
• SEBI turnover fee
• GST on broking charges
• Stamp duty for stockbroker trades
• Futures trading
• Securities transaction tax
• Zerodha hidden charges
• Pledge and unpledge charges
• Delayed payment interest at Zerodha
• F&O futures brokerage
• F&O options brokerage
• NSE Clearing Limited
• National Stock Exchange
• Bombay Stock Exchange
• Securities and Exchange Board of India
• Demat account
• Zerodha
• Kite by Zerodha
• Zerodha Console
• Is Zerodha safe

External references

• MCX India
• MCX Clearing Corporation risk management
• NSE Clearing commodity derivatives margins
• Zerodha support: types of margin
• SEBI

References

1. MCX Clearing Corporation, risk-management framework on SPAN, extreme loss margin and additional margins (accessed 20 June 2026).
2. NSE Clearing, commodity derivatives margin policy on tender period, pre-expiry and delivery margins (accessed 20 June 2026).
3. SEBI circular on margin period of risk for commodity derivative contracts, minimum two days.
4. SEBI circular on pre-expiry margins for cash-settled contracts susceptible to near-zero or negative prices.
5. Zerodha support, “Different types of margin”, support.zerodha.com (accessed 20 June 2026).