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MTF (Margin Trading Facility) is a service that allows an investor to purchase shares and securities from available capital by paying a fraction of the overall transaction value (margin). Depending on the investor's availability, the margin may be offered in the form of cash or shares as collateral. In today's flog we are going to take a look at the most frequently asked questions about MTF trading. So, let's begin.

What is Margin Trading Facility (MTF)?

Margin Trading Facility is buying stocks by putting 50% own money and balance 50% by the Broker to carry delivery positions. Thus availing the 50% funding on the stock which the client intends to buy. It is a type of funding or leveraging the position in the market by the investor by paying half the amount in Cash or Securities.

How is MTF beneficial?

You can hold on to your Delivery positions for longer periods of time and avoid auto square off on T+5 days thus making better use of stocks lying idle in your DP account by giving them as margins.

How to do Margin trade funding?

The client will have to activate the MTF account with Stock Broker by signing and submitting some documents and Transfer the MTF margin in cash or approved stock collateral to Broker's Margin DP Trading Account.

is there any interest is applicable?

The client availing the Margin Trading Facility will have to pay interest as per policy on the funded part.

Will I have to pay the difference in Amount if the market falls?

If the Bought stock falls below the buying price, then appropriate top-up (MTM Loss) shall be paid by the client to maintain the ratio of 50%-50%.

Will I get a Dividend and other corporate action?

Yes, if any corporate action takes place on the collateral, then brokers are obliged to pass it to the client. Like Dividends, bonuses, Split, etc.

Margin Trading is possible in the Derivative segment?

No. MTF is a facility extended by Stock Broker only for the Equity Cash Segment.

Can I execute intra-day trades under MTF?

Yes, to the extent of margin/collateral available to Broker provided by the client.

If I fail to maintain the required margin then?

In case the margin falls below the minimum required margin, the Client shall not be allowed to buy any securities under MTF. Stock Broker shall make the Margin Call and will liquidate at any time when sufficient margins are not in place or make initiate the action as per the arrangement between Broker and Client.

Example: If client bought Reliance of Rs. 1,00,000/-; then Client needs to pay only 50,000/- and balance Rs.50,000/- shall be funded by Stock Broker.

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attention-icon Attention Investors

1) Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020. 2) Update your mobile number & email Id with your stock broker/depository participant and receive OTP directly from depository on your email id and/or mobile number to create pledge. 3) Pay 20% upfront margin of the transaction value to trade in cash market segment.  4)Investors may please refer to the Exchange's Frequently Asked Questions (FAQs) issued vide circular reference NSE/INSP/45191 dated July 31, 2020 and NSE/INSP/45534 dated August 31, 2020 and other guidelines issued from time to time in this regard.5) Check your Securities /MF/ Bonds in the consolidated account statement issued by NSDL/CDSL every month. 6) For Stock Broking transaction : Prevent unauthorised transactions in your account 7) KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (Broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary  8) Update/ confirm your mobile number/email ID with us OR If you wish to change/ modify the current Mobile No. & E-mail ID, you are requested to provide MODIFICATION FORM duly filled in and signed OR If you do not want to provide Mobile No. & E-mail ID, you are requested to send DECLARATION FORM duly filled and signed.  9) Receive information of your transactions directly from exchange on your mobile/email at the end of the day...Issued in the interest of Investors 10) No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remain in investor's account. 11)As per SEBI Circular MIRSD/ SE /Cir-19/2009 dated December 3, 2009 Client transaction account shall be required to do the actual settlement of funds and securities at least once in a Quarter or month.