Liquidation involves moving excess stocks from Funded stocks in MTF (Margin Trading Facility) to Normal segments. Here are some key terms:

• Funded Stocks: Stocks bought under MTF.
• MTF Debit: Total debit in the MTF ledger.
• MTF Collateral: Cash or stock used as collateral for funding.

Liquidation Scenarios:

1. Scenario 1: The system compares the MTF debit with the Funded stock value at CMP or Cost, whichever is lower. If the MTF debit is lower by ₹10,000, stocks worth ₹10,000 are moved to your demat account as free stocks. For example, with an MTF debit of ₹25 lakhs and funded stock value of ₹25.5 lakhs, stocks worth ₹50,000 will be released to your demat account. Navia liquidates client positions on a FIFO basis, starting with the highest value security. This process is currently done, once in a month

2. Scenario 2: If there is a shortfall in payout for MTF stock, the trades are transferred to the normal segment. For instance, if you bought 10,000 shares of A but only received 9,900 in the payout, the entire trade then moves to the NSE CM segment, and shares will be sold on T+1 day to clear any debit.

3. Scenario 3: When the required margin of a stock increases to 100%. If the VAR margin requirement for a stock changes, the stock is liquidated from MTF. For example, if stock 'X' bought with a 53% margin requirement increases to 100%, it will be removed from funded stocks, requiring full payment of the purchase value, triggering liquidation.

An email with MTF statement will be sent to you on a daily basis. The first section of the statement mentions the debit amount. The second section explains the trades done for the day. You will find settlement type as 'MTFLIQU' whenever a liquidation is done.

Alternatively, you may observe liquidated stocks changing from 'Pledged' status to 'free status' in your demat account.

What can be done with liquidated stocks?

You may bring back the liquidated stocks as collateral to avail more funding. Earlier, the liquidated stocks were easily brought in as collateral without an email request. With the new regulations, this is not possible now. You can however, pledge them online from your trading terminal. To know how to pledge it online, check here. We will subsequently initiate the pledging process and you will receive an email and SMS to your registered details from NSDL for you to authorize by validating it with an OTP. It involves one more step, nevertheless, all these are done to protect investors to ensure that no stocks move out of their demat account without their knowledge