In consonant with our philosophy at TradeSmart Online to bring in new products and services which will prove beneficial to your trading, we take this opportunity to announce the introduction of Margin against shares (MAS) services.
What is Margin against shares?
Margin against shares is basically a value added service. It allows you to get exposure/ margin against shares in your demat account by keeping them as collateral. The collateral value of these shares is calculated after applying a hair-cut.
The total limit provided for trading under this feature is subjected to having Cash to Collateral ratio of 40:60. This means that to get the complete benefit of your collateral, 40% of the margin will have to be in cash.
Let us take an example: ABC has cash balance of Rs 40,000 in his account and has pledged shares worth Rs 1 lakh of ACC for margin benefit. If the haircut for ACC is 15%, then the collateral value of the shares after hair-cut will be Rs 85,000. Since the the total limit provided will be in the ratio of 40:60, ABC will get total limit of Rs 1,00,000 (Rs 40,000 cash + Rs 60,000 collateral). In other words, the collateral value is equal to 1.5 times of your opening balance, i.e 40,000*1.5=60,000. Hence, your total amount available for trading is 40,000 + 60,000 which is Rs 1,00,000.
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Formula for calculating collateral value after Hair-cut:
(Quantity of the stock pledged x Previous day closing price) x (100% – Haircut% for the stock)
Check the hair-cut percentage for various scrips on our website.
Before explaining the process to get margin against your shares let us discuss few of the features of MAS.
- Segments & product types available for MAS:
Segment Product type Cash MIS, NRML(Only NSE cash), CO F&O MIS, NRML, BO, CO Currency Derivatives MIS, NRML, CO
MAS will not be available for buying securities in CNC and for buying Options contracts. Also, MAS will not available for trading in the commodity segment.
- List of scrips available for pledging under MAS: The list of scrips available for pledging under MAS has about 850 stocks in it. This list is decided as per TradeSmart Online’s internal risk policies. It will be reviewed periodically and updated accordingly.
- Charges: The pledging charges will be Rs 60 + service tax (Service tax shall be replaced by GST @18% with effect from 1st July 2017)per scrip irrespective of the quantity. So if you have pledged 100 quantity of Reliance and 200 quantity of ACC you will be charged Rs.120 (60*2) exclusive of the service tax (Service tax shall be replaced by GST @18% with effect from 1st July 2017). The pledge charges will be debited from your ledger the day you place the pledge request. No charges will be applicable for unpledging.
- Delayed payment charges (DPC): For F&O and currency trading, the Exchanges accept 50% margin in cash and 50% in shares. The collateral received from you will be given to the exchange against your margin requirements. However, we’d like to provide you a higher collateral benefit (60%) for intraday purpose. In case the end of the day cash margin is less than 50% of the margin utilized, delayed payment charge @ 0.05% per day will be levied on the amount funded by us to maintain the cash:collateral ratio at 50:50. For Cash segment the delayed payment charge @ 0.05% per day will be levied on the total ledger debit. If there is no ledger debit at the end of the day, these charges will not be levied.
- Brokerage Plans: MAS is available for 0.007% (Value Plan) and Rs 15 (Power Plan) brokerage plans only.
- Trading Platform: It will be available for all NEST platforms (Desktop, Mobile and Browser).
- Corporate Action: In case of any corporate action (except rights issue) for pledged stocks the benefits of corporate action will be transferred to you.
Where to view collateral benefit in the trading terminal?
Collateral benefit could be viewed in NEST Trader in RMS View Limits>Direct Collateral
How to pledge the shares for margin?
The request for share pledging has to be placed through BOX. All pledge requests received till 4.00 pm on trading days will be processed the same day and the benefit will be available for trading the next trading day. Any requests received after that will be processed on the next working day.
How to un-pledge the shares?
The shares given for pledging could be un-pledged from BOX. All unpledge requests received till 2.00 pm on trading days will be processed the same day and will be transferred to your holdings within a day. Any requests received after that will be processed on the next working day.
However, if you have used margin given against your collateral or if there is ledger debit in your account, then the unpledge request will be rejected.
Pledging and Un-pledging request received on Saturday before 12.00 pm will be processed on the same day and the benefit will be available for trading the next trading day.
We are excited to launch MAS and are confident that it will benefit you with trading. We will continue add new features to this as we go forward. Please feel free to post your queries/suggestions in the comments section below and we shall make sure that they are answered at the earliest.