NRML product code on Zerodha

NRML (Normal) is a product code on Kite, Zerodha’s trading platform, used for futures and options, currency derivatives, and commodity derivatives positions that are intended to be held overnight or for multiple sessions. Unlike MIS (Margin Intraday Squareoff), there is no auto-square-off under NRML. The position remains open until the trader chooses to close it or until the contract expiry, subject to margin maintenance requirements.

NRML positions are margined at the full exchange-mandated SPAN (Standard Portfolio Analysis of Risk) plus exposure margin, without the intraday discount that MIS provides.

Segments where NRML applies

NRML is the appropriate product code for:

• NSE equity F&O: Stock futures, Nifty futures, Bank Nifty futures, stock options, index options.
• BSE equity F&O: Corresponding BSE-listed derivatives.
• NSE currency derivatives: USD/INR, EUR/INR, GBP/INR, JPY/INR futures and options.
• BSE currency derivatives: Similar currency pair instruments.
• MCX commodity derivatives: Crude oil, gold, silver, natural gas, agricultural commodities.

NRML does not apply to equity cash (shares). Equity delivery uses CNC; equity intraday uses MIS.

Margin requirements under NRML

The margin requirement for an NRML position is set by the exchange through the SPAN system (developed by the CME Group and adapted for Indian markets by NSE and BSE). SPAN calculates the worst-case loss for a portfolio of derivatives positions under a set of hypothetical market scenarios. The SPAN margin is the minimum required.

In addition to SPAN margin, an exposure margin is collected on top, typically 2–4% of the contract value for index derivatives and higher for stock derivatives.

The total NRML margin = SPAN margin + Exposure margin.

This is a larger margin than the MIS margin for the same position, reflecting the overnight risk. Zerodha does not offer additional leverage on NRML positions beyond what the exchange mandates.

Mark-to-market settlement

NRML futures positions are subject to daily mark-to-market (MTM) settlement. At the end of each trading day, the exchange calculates the profit or loss on all open futures positions relative to the daily settlement price and settles the difference in cash.

• If a NRML long futures position has gained value, the profit is credited to the trading account.
• If it has lost value, the loss is debited.

This daily cash settlement means the margin requirement effectively resets daily. A long futures position that has lost money will require additional cash (margin call) to maintain the required NRML margin level.

Options positions under NRML are not subject to daily MTM settlement; the option premium is settled at the time of opening the position (for buyers) or at expiry (for sellers, after margin maintenance throughout the holding period).

Expiry and physical delivery

Futures expiry: NRML futures positions held to expiry are cash-settled (for most index futures) or physically settled (for stock futures). NSE mandates physical delivery for stock futures contracts. Physical delivery requires the seller to deliver actual shares and the buyer to receive them, with cash settlement for any fractional amounts.

If a trader holds NRML stock futures (long or short) to expiry and does not close them before the expiry date, NSE compulsorily physically settles the contract. The long position buyer must have CNC delivery funds; the short position seller must deliver shares. Zerodha sends multiple notifications before expiry to encourage traders to close NRML positions before physical delivery obligations arise.

Options expiry: NRML options positions held to expiry are exercised (if in-the-money) or expire worthless (if out-of-the-money). In-the-money options on stock underlyings are physically settled.

Rollover of NRML positions

Since NRML allows overnight holding, traders can carry futures positions across multiple sessions and roll them over from the current-month contract to the next-month contract near expiry. This rollover involves closing the current-month NRML position and opening a new NRML position in the next month.

NRML versus MIS

Converting MIS to NRML

Kite permits converting an open MIS F&O position to NRML during the trading session, subject to sufficient additional margin being available. This is useful when an intraday F&O trade develops in the trader’s favour and they decide to carry it overnight.

The conversion is done from the positions panel. Kite calculates the additional margin required to upgrade from MIS to NRML margin and blocks it from the available balance.

Margin call under NRML

If the market moves against an NRML position and the account balance falls below the required NRML margin (after MTM debit), Zerodha issues a margin call. If additional funds are not deposited before the next session, Zerodha may square off the NRML position to bring the account to the required margin level.

SEBI’s peak margin requirements also apply to NRML positions, the margin required is the same regardless of whether the position is held intraday or overnight, removing any ambiguity about intraday versus overnight margin treatment.

Common mistakes and edge cases

Holding stock futures to expiry unintentionally. A trader who holds NRML stock futures and forgets expiry will face physical delivery obligations. Zerodha charges heavy penalties for positions going into physical delivery without adequate preparations. Traders must close NRML stock futures before expiry if delivery is not intended.

Insufficient margin for overnight carry. A trader who opens a position on MIS margin and attempts to convert to NRML near 3:20 PM may find insufficient margin for the conversion. If conversion fails, the position will be auto-squared by the MIS system.

Currency NRML and exchange rate moves. Overnight NRML currency positions are exposed to global forex market movements. Significant moves in the US Federal Reserve’s statements or RBI actions can cause gap moves at the following day’s currency market open.

MTM debit on extended losing streaks. A trader holding a NRML futures position through an extended adverse move will see daily MTM debits reduce available margin progressively. Without active monitoring, the margin can be eroded to the point of forced liquidation.

Regulatory context

The SPAN margin system used for NRML positions was mandated by SEBI for all recognised exchanges in India. NSE’s SPAN parameter files are published daily and updated to reflect current market conditions. SEBI’s risk management circulars govern the minimum margin collection for overnight derivative positions and prohibit brokers from extending credit against NRML margin requirements.

References

1. NSE circular on SPAN margin methodology, NSE/CMPT/2015 series.
2. SEBI master circular on risk management for stock exchanges, SEBI/HO/MRD/2023.
3. Zerodha support article: “What is NRML?”, support.zerodha.com.
4. NSE circular on physical settlement of stock derivatives, NSE/MEM/2019 series.
5. Zerodha margin calculator, zerodha.com/margin-calculator.