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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