Exposure margin is an additional margin collected by Indian stock exchanges over and above the SPAN margin for futures and options positions, designed to cover residual risks not captured by the SPAN margining framework. For equity index futures like Nifty 50, the exposure margin on NSE is typically 3% of the notional contract value, while for individual stock futures it is 5% or 1.5 times the standard deviation of daily returns — whichever is higher. Exposure margin acts as a buffer against gap risk — the risk that the market opens significantly beyond the SPAN margin's worst-case scenario — particularly over weekends, holidays, or around major macroeconomic events. The total initial margin collected from F&O traders in India is the sum of SPAN margin and exposure margin. Both components are held with the clearing corporation as collateral to ensure settlement integrity.
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