General Queries on Margin Trading Facility (MTF)
Q. What is Margin Trading?
A: Margin Trading is essentially buying stocks by partly putting in your own investment (either as cash or as stocks) and the rest being funded by the broker. As a result you can buy larger quantity of stock with the same amount of money (you only pay a part of the total value) as opposed normally buying them by paying the entire value of the stock.
Q. What is Margin Trading Funding (MTF) Facility?
A: MTF is the funding facility offered by the Company to its customers to buy stocks with a minimum required margin and hold the stocks for an extended period of time.
Q. What is the benefit of MTF?
A: Client can carry delivery position for extended time, by paying only a small percentage of the securities value known as margin amount, instead of the entire value of securities.
e.g. If you have to buy Infosys shares worth Rs. 1,00,000 then the margin amount to be paid by you will be around Rs.25000, the remaining amount of around Rs.75000 will be funded by broker. You can carry this position for an extended time as long as you ensure that any losses on your open positions are settled immediately. In case you wish to take delivery you just need to pay the funded portion. Interest will be charged on the funded amount/Debit amount.
Normally, with Rs. 25,000 limit you could buy only Rs. 25,000 worth of Stocks. Using MTF you can now enter position worth Rs. 1,00,000 with Rs. 25,000 limit. Whats more is that the Rs. 25,000 to be funded by you can be in the form of stocks and not necessarily cash. This also ensures that your idle stocks are put to better use.
Q: How can I avail this MTF facility?
A: This MTF facility can be availed by opening the MTF trading account and transferring initial margin by way of cash/ collateral to purchase the shares under this facility.
Q. Can I get the MTF funding facility to my existing trading account?
A: Yes. You can activate the MTF segment on your existing trading account itself and there is no need to open a separate trading account.
The MTF product is added to the same trading account as separate segment i.e. MTF segment. For more details on how to activate the MTF segment click here.
Q: Do I need to open a separate demat account for MTF funding?
A: No, a separate demat account is not required for availing this MTF funding facility.
Q: Do I need to sign an agreement apart from KYC, to open MTF account?
A: Yes, you need to sign an agreement, and have to agree to the terms and conditions of the MTF funding account. Click here to open MTF acocunt
Q. What are the Scrips funded under this MTF?
A: Equity shares that are classified as group 1 security and as in the approved list are available for the margin trading funding. (Click here for list of scrips).
Q. What are the securities accepted for MTF collateral ?
A: For list of scrips accepted as MTF collateral click here
Q: What is the amount of margin /leverage that I need to pay/have during buying stocks?
A: Required margin and leverages may vary for different stocks. See details given below.
|Category of Stock||Initial margin and maintenance margin as required by SEBI and as set in Back office.||Initial margin and maintenance margin as set in Trading system|
|Group I stocks available for trading in the F&O segment||VaR + 3 times applicable ELM||VaR + 3.5 times applicable ELM|
|Group I stocks other than F&O stocks||VaR + 5 times applicable ELM||VaR + 6 times applicable ELM|
VaR – Value at risk margin ELM – Extreme loss margin which is approx 5%
Q. What type of initial margin is allowed under this MTF?
A: We may allow customers to pay margin in the form of NSE Approved list of shares post hair cut or cash or cash equivalent.
Q: What is the segment and under which exchange Margin Trading Facility is offered?
A: Margin Trading Facility is available only under cash segment for selective scrip, traded in the Exchange of NSE only.
Q: Can I purchase the shares from the BSE cash segments?
A: No, you cannot buy shares under the MTF in BSE cash segment, and BSE scrips can be traded in the normal segment without any leverage.
Q: Do I need to pay any charges for Opening / activating the MTF trading account.
A: No, you no need to pay any charges for opening the MTF trading account.
Q: How do I get all details of my Margin Trading Funding transaction?
A: You will get all communication regarding confirmation of orders/trades, margin calls, decision to liquidate the position / security on your registered email.
Q: What is the difference between a normal trading account and MTF funding account?
A: Normal trading account Company allows the client to purchase the shares and securities and hold it for a period of T+2+5 day. The account will be blocked on the 7th day and shares shall be liquidated by the Company. But under the MTF account, the client can purchase the shares and hold it for a period beyond 7 days by meeting the required margin.
Q: Can I have two MTF account with different brokers?
A: No, the client can avail this funding facility only from a single broker and the client has to give a declaration at the time of MTF account opening.
Q: Can I get the benefit of the corporate actions like dividend, bonus etc. for the shares held in the MTF account?
A: Yes, the benefit of the corporate actions will be credited to your account.
Q: What if my stocks bought under Margin Trading Facility get appreciated? Will I get additional margin on it?
A: No! you will not get benefit of any MTM gain on your margin trading position.
How to use the Trading system for Margin Trading Facility (MTF) through NEST /Infini Trading Solutions (ITS)
Q. How do i mark certain trades for MTF ?
Our system is very simple. In our trading platform (NEST/ITS) when you place order you can select product type as MTF and place the order. All trades that are executed under MTF product will be then uploaded to back office for allocation to MTF segment. Please note that trades marked as NRML/CNC/MIS/CO/BO cannot be allocated to MTF. However you can convert trades marked as NRML/CNC/MIS to MTF product in the front end before market closes. This product conversion is possible subject to margin availability in MTF segment in the trading system.
Q. How do i transfer funds for placing orders in MTF segment ?
A: You can use our payment gateway facility or NEFT/IMPS to transfer funds. Once the funds are transferred they will be credited to the Equity segment. You need to send an email to firstname.lastname@example.org if you want to transfer these funds to the MTF segment. Our RMS team will check for funds availability in the Equity segment and transfer funds to the MTF segment of the trading system. Please allow 30 minutes after sending email to our support desk to transfer the funds.
Q. Can i use the funds lying in the Equity segment for MTF and vice versa ?
A: No you cannot. In the trading system the risk management is separate for Equity and MTF segment. This means that any funds lying in the equity segment cannot be used to take exposure in the MTF segment and vice versa. If you want to utilise the funds in equity segment to MTF segment then please send an email to email@example.com and we will move the funds from equity to MTF and vice versa. Please allow 30 minutes after sending email to our support desk to transfer the funds.
Q. How is the MTF margin computed in the trading system.
A: This can be better explained with an illustration. For example lets say you have the following:
a. MTF cash collateral - Rs. 50,000
b. MTF stock collateral (before haircut valuation) - Rs. 5,00,000
c. MTF stock collateral (after haircut valuation ) - Rs. 4,25,000
d. Value of stocks funded at cost - Rs. 3,00,000
e. MTF ledger balance - Rs. -3,10,000 (debit)
In the above scenario the formula for calculating the MTF uploaded balance in trading system would be a+c+d+e. In our example the amount would be Rs.4,65,000.
The stocks funded would be uploaded as positions in the trading platform with cost price, Hence the trading platform would deduct the appropriate margin for the positions at either VAR+3.5 ELM or VAR + 6 ELM depending upon if the funded stock in NON derivative stock or derivative stocks. Lets assume in the above example that the margin on the funded stock of value Rs. 3,00,000 is Rs. 1,00,000.
The available MTF balance for further positions would be = 4,65,000 - 1,00,000 = 3,65,000
Q. Is MTF trading facility available on NOW trading software ?
A: No MTF trading is only available on Infini Trading solutions and software charges apply. To know more about Infini Trading solutions click here
How to use the back office for Margin Trading Facility (MTF)
Q. How do I know that my MTF trades are allocated to my MTF trading segment?
A: Everyday, once we receive the trade file from the exchanges, we upload all the trades into your trading account. Then we upload only your MTF trades and allocate the same to your MTF segment. If at any time the MTF segment ledger does not have sufficient margin then some of the MTF trades may not get allocated to the MTF segment in the back office and will be retained in the normal segment only.Further, Navia shall send an e-mail confirmation of the shares that are allocated to the MTF segment at the end of the day. Some of the reasons why your MTF marked trades may not get allocated in the MTF back office segment are:
a) The scrip should be as per approved basket of MTF
b) The existing client funding is within the amount prescribed by SEBI
c) The existing client funding across all clients in Navia is within the amount prescribed by SEBI
d) Client should have sufficient collateral/Cash margin to avail this facility
Q: What is the meaning of margin calls?
A: Margin calls are the alerts made by the Company when the available margin is less than the required margin as per SEBI norms as explained above.
Q: When will NAVIA intimate client for the margin call ?
A: As long as the client has a position under MTF, then on daily basis an email would be sent from back office.
Sample email confirmation of MTF allocation sent by Navia at the end of the day is given below. As long as there is a MTF position in the client account such an email would be sent to client on daily basis. If there is a margin call it will be reflected in this report. If the Shortage / Excess value in the report below is a debit then it means there is a margin call and you to immediately bring in the required shortage either in the form of funds or securities. In the below example there is a debit and hence a shortage of Rs. 2,78,683.60 and this shortfall needs to be paid immediately either in cash or in the form of additional collateral.
In the below example following are the particulars
1. Client MTF ledger balance - 30,09,986.61 (this is the amount being funded and on which interest would be levied)
2. Value of stock collateral given by client after haircut - Rs. 9,76,861.45
3. Value of cash collateral given by client - NIL
4. Value of stocks being funded currently - Rs. 29,73,679.55
5. Margin required as on beginning of day on funded stock of above value - Rs. 5.78.365.94
6. Mark to Market loss on the stocks being funded (Close price - Cost price of stock) - Rs. 6,40,872.05
7. Other loss/charges - 36,307.06
Hence as per formula given below there is a margin call / shortage of Rs. 2,78,683.60 which client needs to pay immediately
Q: What is the impact of the margin call if not honored by the client?
A: As per SEBI requirement once a margin call is sent to the client, the client must bring in the required shortfall immediately. If the client does not bring in the required margins then Navia can liquidate/sell the shares (funded shares and collateral) if the client fails to meet the margin call requirements.
Q. If there is a margin call in the MTF segment and if i have credit balance in other segments, will my credit balance be adjusted against the margin calls in MTF segment ?
Yes. If there is a margin call in MTF segment and if you have credit balance in other segments, then such credit balance would be transferred to the MTF segment to prevent further margin calls.
Q. If i have a debit in my MTF account ledger and no funded stock positions, then how long am i allowed to keep such debits ?
If you have no funded stock positions in your MTF account but have a debit in MTF ledger, then such debits maybe due to unpaid charges and/or booked loss on your MTF trades. All such unpaid charges or booked loss must be cleared within 5 working days from the date of closing your final MTF position. (5 continuous days of no funded MTF stocks). If not cleared within 5 working days then Navia reserves the absolute right to liquidate your MTF collateral stock to adjust the unpaid charges and/or MTF trade losses. Further if your MTF position is liquidated due to margin call issued by Navia, then Navia reserves the right to liquidate your colleteral stock immediatey without waiting for 5 working days as stated above.
Q. Is there a facility for me to view my MTF collateral, MTF funded trades and my MTF balance available limit ?
A: Yes when you login to our Online back office portal there is a separate MTF section where you can view all the details concerned with your MTF account. Sample snap shot of this MTF section given below:
Q: How can I identify the margin call transaction liquidated by the company?
A: Margin call transactions are marked separately in the contract note, when liquidation is initiated by the company.
Q: What happens if I transfer funds to the MTF segment of my trading account and have not done any trading?
A: Margin trading accounts where there is no transaction for 90 days shall be settled immediately / as per running account settlement
Q: How can I carry and hold my funded position for a long period?
A: The shares purchased under the funding account can be held by maintaining the required margin as per the margin calls for a period of upto 1 year
Q: What is the interest rate offered under this MTF funding?
A: We offer the margin trading funding facility with the interest rate @ 2% monthly.
Q. How is interest amount calculated ?
A: The interest amount is calculated on a daily basis based on the end of day debit balance in the MTF segment
Q. If i have credit in Normal segment and debit in MTF segment will interest still be charged on the MTF segment ?
A: For the purpose of interest calculation in MTF segment only the MTF ledger balance would be considered. Any credit in the normal segment will not be considered or adjusted while calculating interest on MTF segment. If you want to move the credit in Normal segment to MTF segment then you need to send email to firstname.lastname@example.org
Q: Can I transfer funds from my normal trading account segment to the MTF segment?
A: Yes, you can transfer the funds from the normal trading account segment to the MTF segment, as per the terms & conditions of the product.
Q: How can I sell the MTF funded stocks in the MTF trading account?
A: We shall upload the MTF funded stocks on a daily basis to the trading terminal, and you are allowed to sell the MTF funded stocks using MTF product code
Q. Can i sell my MTF collateral shares from the trading terminal ?
A: NO. You cannot sell the MTF collateral shares from the trading system. You can view your MTF collateral shares and also get margin for the collateral shares but you cannot sell them Online as you might have utilized the collateral margin for taking positions in MTF segment. If you would like to sell the MTF collateral shares, then please send email to email@example.com providing details of the shares you like to sell. Our RMS team will analyse the utilization of collateral and accordingly help you to sell the MTF collateral shares.
Q. If i buy 100 shares of X company under MTF product and sell the same under NRML product in the same day, then will my shares be allocated to MTF ?
NO. MTF allocation will happen only if there is a net position in a particular share. In the above scenario since you have bought and sold 100 shares there is no net position and hence no MTF allocation will happen.
Q. If i buy 100 shares of X company under MTF product and then sell the same under NRML product later on some other day, then will delivery be taken from my MTF funded shares account ?
NO. Delivery will not be taken from the MTF funded shares since you have sold the share in NRML product which is a non MTF product. Delivery will only be taken if you square off the MTF funded stocks which are uploaded as positions at cost price in the trading platform. If you have sold the share in NRML product and do not have the shares in your demat account or normal collateral account then the same will be treated as short delivery and will go for auction.
Q: Is there any cash -collateral ratio for the initial margin?
A: No, under this facility there is no cash -collateral ratio.
Q: What is the hair cut percentage applied for the collaterals?
A: NSE hair cut percentage or VAR haircut is applied for the valuation of the collateral value for the purpose of margins. This means that if the VAR of a scrip is 10% then 90% of the value of the scrip will be provided as margin.
Q: Can I Trade on Single Scrip in the MTF segment?
A: Single scrips concentration is allowed for stocks in the NIFTY 50 index. However for stocks other than in the NIFTY 50 index, single scrip concentration is not allowed in the MTF segment and also the client cannot transfer single scrip towards the Collateral account for availing the Collateral margin. The maximum single scrip funding limit for a client will not exceed Rs. 50 Lakhs where the scrip is part of NIFTY Next 50 and will not exceed Rs. 25 lakhs where the scrip is neither part of Nifty 50 nor Nifty Next 50.
Q: Is there any reporting to the exchange on a T+ 1 day of the purchases by the company?
A: Under this funding facility, Company shall report to the exchange with the client details and the funding amount offered to the client on a daily basis on or before 12 PM.
Q: Can I close/ suspend the MTF funding facility offered by the company.
A: Yes, the client can close or suspend the Margin trading account at any time after paying the dues.
Q: Can the company terminate/ suspend the client MTF segment on my trading account?
A: Yes, the Company can terminate/ suspend the client MTF segment, in the event of client committing the breach of any terms & conditions of the MTF funding.