Full formBusiness & Corporate
LOMstands forLoss of Margin
Full Form of LOM
What is LOM?
Loss of Margin (LOM) refers to a situation in derivatives trading, particularly in Indian stock markets, where the collateral or margin deposited by a trader falls below the required minimum level due to adverse price movements. In India, LOM is a critical concept in futures and options trading, governed by regulations from the Securities and Exchange Board of India (SEBI) and enforced by clearing corporations like NSE Clearing and BSE Clearing. When a trader experiences a LOM, the broker typically issues a margin call, requiring the trader to deposit additional funds or securities to restore the margin to the required level. If the trader fails to meet the call, the broker may square off existing positions to limit further losses. LOM calculations are based on daily mark-to-market (MTM) losses, initial margin requirements, and exposure margins. This mechanism ensures risk management and market stability, preventing defaults. In Indian trading circles, LOM is a common term used by brokers, traders, and regulatory bodies. For students preparing for NISM Series VIII (Equity Derivatives) or SEBI certification exams, understanding LOM is essential as it forms a core part of margin trading and risk management modules. The term is also relevant for retail traders who engage in leveraged trading, as neglecting LOM can lead to forced liquidation.
LOM का फुल फॉर्म
मार्जिन की हानि
Example
The broker sent a LOM notice when the Nifty futures position dropped below the maintenance margin due to a sharp market decline.
LOM — frequently asked questions
What is the full form of LOM?
LOM stands for Loss of Margin, a condition in derivatives trading where the margin held by a trader falls below the required minimum due to adverse price movements.
How is LOM calculated in Indian stock markets?
LOM is calculated by comparing the current margin—based on mark-to-market losses and initial/exposure margins—against the minimum required margin set by the clearing corporation. When actual margin falls below this threshold, a LOM event occurs.
What happens if a trader fails to meet a LOM call?
If a trader does not deposit additional funds or securities after a LOM notice, the broker has the right to square off the trader's positions to limit losses, ensuring the margin deficit is covered.