In consonant with our philosophy at TradeSmart to bring in new products and services which will prove beneficial to your online stock 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 available balance, i.e 40,000*1.5=60,000. Hence, your total amount available for online stock trading is 40,000 + 60,000 which is Rs 1,00,000.
Is margin trading helpfull to cut down fake online traders in stock market?
Formula for calculating collateral value after Hair-cut:
(Quantity of the stock pledged x Last trading 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, CO, BO 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 online 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’s internal risk policies. It will be reviewed periodically and updated accordingly.
- Charges: There shall be Rs 15 for pledging and Rs 15 for unpledging + GST charged per scrip per day irrespective of the quantity. So if you have pledged 100 quantity of Reliance and 200 quantity of ACC you will be charged Rs.30 (15*2) exclusive of the GST. The pledge charges will be debited from your ledger the day you place the pledge request. Similarly, the charges will be applicable for unpledging.
- The valuation of pledged shares after Hair-cut will be shown under “Collateral value” column in “RMS View Limits” report in NEST Trader and NEST web. In Sine app and Sine Web, the valuation of pledged shares will be shown under ” Stock Valuation” column in “Trading Balance” report.
- Selling Pledged shares: Pledged shares could not be sold directly without unpledging.
- Payin benefit: For funds(pay-in)transferred during market hours, the cash to collateral benefit of 40:60 ratio will not be made available on same day.
- 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. In case of derivative carry forward positions, at the end of the day if cash margin is less than 50% of the margin utilized, DPC @ 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
- Let us understand DPC by an example
Assume available cash = 40000, share value = 1,00,000, share value after haircut of 15% = 85000. According to 40:60 ratio, Trading limit available is 100000 i.e. 40000 cash + 60000 (1.5*40000) from collateral. If, the trader utilizes the entire amount of Rs.1,00,000 for trading, then
- DPC charge for Derivative contracts:
As mentioned above, cash to collateral ratio is taken as 50:50. The cash to collateral amount reported to exchange will be 80,000 (Cash = 40,000 and Collateral = 40,000). The DPC is charged on 20000 that is the difference of position created (100000) and amount reported to exchange (80000).
- DPC charge for equity trading:
Only available balance is reported to the exchange (40000). With position of 100000, the DPC is calculated on a shortfall of 60000 (100000 – 40000)
- DPC charge for Derivative contracts:
- 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> Collateral Value
How to pledge the shares for margin?
The request for share pledging has to be placed through our backoffice BOX. All pledge requests received till 2.00 pm on trading days will be processed the same day and the benefit will be available for online stock trading the next trading day. Any requests received after that will be processed on the next working day.
How to un-pledge the shares?
Shares could not be automatically unpledged if you sell directly from the terminal. The shares given for pledging need to 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 shown in your holdings within a day. Any requests received after that will be processed on the next working day.
However, if you have used margin 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 working Saturday before 12.00 pm will be processed on the same day and the benefit will be available for online trading the next trading day.
We are confident that it will benefit you with online 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.