Margin on consolidated crystallized obligation
Also written Consolidated crystallized obligation margin
Part of initial margin that blocks a client's net payable from closed-out futures profit or loss and option premium intraday, and all settlement obligations at end of day, until settlement.
In plain language
Some amounts a client owes are no longer "risk" — they are certain. If a client closes a futures position at a loss, or buys options, the money is owed; it just has not been settled yet. Until it is, the clearing corporation wants it covered.
That is the margin on consolidated crystallized obligation. "Crystallized" means the obligation has become fixed; "consolidated" means everything owed by the client is netted into one amount.
The workbook describes it as representing:
- Intraday — payable crystallized obligations from closed-out futures and premium payable/receivable at client level.
- End of day — payable obligations at client level considering all futures and options positions.
If the net figure is payable, it is blocked as margin; if receivable, nothing is blocked. The margin is released on completion of settlement.
It is part of initial margin, alongside SPAN and delivery margins.
How it works
Components (Chapter 7, section 7.9.1.1.4):
| Intraday | End of day |
|---|---|
| Premium payable / receivable | Futures mark-to-market profit / loss to be settled |
| Futures crystallized profit or loss, using weighted average prices of trades | Options premium payable / receivable |
| Options exercise / assignment for expired contracts | |
| Futures final settlement for expired contracts |
What it replaced. The workbook states that it has replaced the net buy premium, intraday crystallized losses, assignment margin and futures final settlement margin that used to be levied separately.
Collection from clients (section 7.10.2). In the currency derivatives segment, initial margin and extreme loss margin must be collected upfront, in advance of trade; margin on consolidated crystallized obligation must be collected by T+1. Short-collection or non-collection must be reported to the exchange on T+5.
Why it matters for options buyers. Premium payable is part of this margin, so an option purchase blocks funds immediately even though premium settlement happens on T+1.
The formula
Intraday CCO = Premium payable − Premium receivable + Crystallized futures loss − Crystallized futures profit
Margin blocked = CCO if payable (> 0), else nil
A worked example
Illustrative. The client, trades and prices are hypothetical; the netting rules are the workbook's. One lot = USD 1,000.
During the day, Farhan:
- Buys 10 lots USDINR futures at 83.10 and later sells all 10 at 83.05 — closed out.
- Buys 20 lots of USDINR calls at a premium of 0.30.
- Sells 10 lots of USDINR puts at a premium of 0.20.
Crystallized futures loss = (83.10 − 83.05) × 10 × 1,000 = Rs 500
Premium payable = 0.30 × 20 × 1,000 = Rs 6,000
Premium receivable = 0.20 × 10 × 1,000 = Rs 2,000
Net intraday obligation = 500 + 6,000 − 2,000 = Rs 4,500 payable
Rs 4,500 is blocked as margin on consolidated crystallized obligation. The short puts separately attract SPAN initial margin and extreme loss margin, which his broker must have collected upfront; the Rs 4,500 must be collected from Farhan by T+1.
Once the premium and futures settlement are completed, the Rs 4,500 margin is released.
Why NISM asks about it
Chapter 7, section 7.9.1.1 (Initial Margin), lists it as a component of initial margin, and section 7.9.1.1.4 defines the intraday and end-of-day computations and the four older margins it replaced. Section 7.10.2 gives the T+1 client collection rule. Expect component lists and "which margins did it replace".
Common exam traps
- It is part of initial margin, not a separate category like extreme loss margin.
- Only a net payable is blocked; a net receivable blocks nothing.
- Intraday futures crystallized P&L uses weighted average prices of trades.
- It replaced four margins: net buy premium, intraday crystallized losses, assignment margin and futures final settlement margin.
- Collected from clients by T+1, while initial margin and ELM must be collected upfront.
- Released on completion of settlement.
Where this is taught
Free preparation for NISM Series IVRelated terms
- Extreme Loss MarginA flat 3.5 per cent margin collected on cash-market positions to cover losses falling outside what the VaR margin is designed to capture.
- SPANThe scenario-based system clearing corporations use to compute initial margin — it revalues a client's whole derivatives portfolio under sixteen what-if scenarios and charges the worst loss.
- Price Scan RangeThe probable one-day price change used in SPAN margining — based on 6 standard deviations, subject to a minimum percentage of the underlying (1.50% for USDINR).
- Mark to MarketThe daily settlement of a futures position at that day's closing price, so gains and losses are paid in cash every evening instead of accumulating until expiry.
- Option premiumThe price an option buyer pays the seller for the right the contract carries — non-refundable, and made up of intrinsic value plus time value.
- Initial marginThe deposit both the buyer and the seller of a futures contract must place before the position is accepted, sized to cover a 99% worst-case one-day loss on that position.