Intraday Square-Off
An intraday square-off is the compulsory closing of all open intraday positions by the broker's Risk Management System (RMS) before the end of the trading day, ensuring that no delivery obligation arises from a position that was opened with intraday (MIS/BO/CO) margin and not converted to delivery.
When an investor opens a position using an intraday product type—labelled as MIS (Margin Intraday Square-off), BO (Bracket Order), or CO (Cover Order) on most Indian broking platforms—they are explicitly communicating the intention to close the position before the day ends. These product types allow higher leverage than delivery-based trades by reducing the margin requirement, but the exchange and broker mandate that they be squared off before the day ends.
Brokers implement auto square-off through their Risk Management System (RMS). The RMS monitors all open MIS/intraday positions and begins squaring them off automatically at a pre-defined time in the afternoon. The exact time varies by broker—common square-off windows range from 3:15 pm to 3:25 pm for equity intraday positions, leaving a buffer before the 3:30 pm market close. For futures and options intraday positions, the window may be slightly earlier. If the market is in a circuit-breaker-triggered halt, the RMS may execute square-offs as soon as trading resumes.
The rationale for compulsory auto square-off is risk management at both the broker and system level. If a client takes an intraday position with higher leverage than permitted for delivery and the market moves adversely, the broker (who has extended the margin) faces a potential loss if the client cannot fund the delivery obligation. Auto square-off caps this risk.
For clients, automatic square-off carries important consequences: the RMS does not take price into account when executing the square-off—it uses market orders or aggressive limit orders to close the position regardless of the prevailing price. This means that if the stock is in a lower circuit or highly illiquid at the time of auto square-off, the position may not close, or may close at an unfavourable price. Brokers typically charge a penalty fee for positions that require auto square-off, in addition to normal brokerage.
Traders who wish to convert an intraday position into a delivery (overnight) position must explicitly do so through the broker's platform before the auto square-off deadline, subject to having sufficient delivery margin available in their account.