CNC, MIS and NRML

CNC, MIS, and NRML are three trading product types used for different purposes. Your choice depends mainly on the market segment and how long you plan to hold the position.

• CNC is used for buying or selling shares on a delivery basis. Purchased shares can be held for any duration.
• MIS is used for intraday trading, where open positions must be closed on the same trading day.
• NRML is generally used for futures and options positions that may be held overnight or until the contract expires.
• Delivery-based equity trades generally follow the T+1 settlement cycle, meaning settlement takes place on the first working day after the trade.
• Margin availability and automatic square-off rules may vary across brokers and market segments.
   

CNC stands for Cash and Carry. It is a product type used for delivery-based equity trading.
When you buy shares using CNC, the shares are delivered to your Demat account after settlement. You can then hold them for as long as you want.
Delivery-based equity trades generally follow the T+1 settlement cycle. This means settlement takes place on the first working day after the trade date, excluding applicable holidays.
CNC is generally used by investors who want to hold shares overnight or for a longer period. You normally need to pay the full purchase amount because intraday leverage is not generally provided for CNC trades.
You can also use CNC to sell shares that are already available in your Demat account. It cannot normally be used to create an overnight short position in the equity cash market.
 

MIS stands for Margin Intraday Square-off. It is used for positions that you plan to open and close within the same trading day.
Depending on the broker, market segment, and applicable margin rules, MIS may allow you to place a trade using a smaller margin than the total value of the position.
However, the position cannot be carried overnight. You must close it before the broker’s specified intraday square-off time.
When you do not close an MIS position yourself, the broker may automatically square it off before the market closes. The exact square-off time and charges depend on the broker’s policy.
MIS can increase both potential gains and potential losses because the position value may be higher than the margin deposited. Careful risk management is therefore important.
 

NRML generally stands for Normal. It is mainly used for positional trading in futures, options, commodities, and currency derivatives, depending on the segments supported by the broker.
Unlike MIS, an NRML position does not have to be closed during the same trading session. You may hold it overnight or until the contract expires, provided that you maintain the required margin.
The required margin may change because of market movements, volatility, contract expiry, or changes in applicable exchange and broker requirements. You may need to add funds when the available margin becomes insufficient.
NRML is commonly used when you expect a derivatives position to remain open for more than one trading session. It does not mean that the position can be held indefinitely because derivatives contracts have fixed expiry dates.
 

The main difference between CNC and MIS is the intended holding period. CNC is used for delivery-based equity trades, while MIS is used for intraday trades that must be closed on the same trading day.
 

CNC does not automatically make an investment low-risk. The value of the shares can still rise or fall after they are delivered to your Demat account.
Similarly, MIS does not guarantee quick gains. Short-term price movements and the use of margin can result in significant losses.
 

MIS and NRML are both commonly used for derivatives trading, but they have different holding periods. MIS is meant for intraday trading, while NRML can generally be used to carry eligible derivatives positions overnight.

NRML does not necessarily involve no leverage. Futures and options positions are margin-based, and the amount required depends on the contract and applicable margin rules.
The term “cost of carry” should also not be treated as a standard broker charge for every NRML order. Its effect depends on the instrument, contract pricing, funding requirements, and the position held.
 

The appropriate product type depends on the market segment, your intended holding period, and the amount of margin available.
Choose CNC when you are buying shares for delivery and plan to hold them overnight or longer. You generally need the full purchase amount for the trade.
Choose MIS when you plan to enter and exit a position during the same trading day. You must close the position before the specified square-off time or the broker may close it automatically.
Choose NRML when you want to carry an eligible futures or options position beyond the current trading session. You must maintain the required margin for as long as the position remains open.
 

CNC, MIS, and NRML serve different trading purposes. CNC is used for delivery-based equity trades, MIS is meant for positions opened and closed on the same day, and NRML is generally used for carrying eligible derivatives positions overnight. Understanding their holding periods, margin requirements, and square-off rules can help you select the right product type. Always check your broker’s specific terms before placing a trade.