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Margin Trading Charges

What are m.Stock's MTF charges?

Introduction to Margin Trading Facility (MTF)

There are times when certain stocks are in an uptrend due to some favourabe news about a sector or company. In such cases, traders may want to buy large quantities of such stocks. However, lack of funds (capital) may restrict or limit them from being able to take the position. In such situations, traders can use Margin Trading Facility (MTF) instead of letting go of the opportunity.

MTF is a funding facility which allows investors to buy stocks by paying a fraction of the total transaction value upfront (just like you pay a down payment for your loans). Your broker (such as m.Stock) funds the balance trade value (up to 80%) in exchange for interest.

The interest charged on your MTF trade is very important as it directly affects your take home profit. This is where m.Stock’s Margin Trading Facility (eMargin) stands out. m.Stock offers one of the lowest interest rates on MTF in the industry. Yes, while MTF interest rate in the industry can go as high as 24% p.a., the maximum MTF interest charged by m.Stock is 9.49% p.a. (on funding up to ₹25 lakhs).

Interest is one of the many MTF charges that investors have to bear. In this article we will discuss about the various MTF charges and also learn about m.Stock’s MTF charges .

m.Stock MTF charges #1: Interest charged on funding amount

Interest charged on MTF trades and your take home profits have an inverse relationship. So, the higher the interest charged, the lower your take home profits. As per industry standards, MTF interest can go as high as 18% p.a. to 24% p.a. However, with m.Stock, the eMargin interest rate ranges from 7.99% p.a. to 9.49% p.a.

The interest charged by m.Stock on eMargin depends on two factors: gross funding value and holding period. The below table shows our eMargin funding slabs and interest charged.

Funding Value eMargin Interest Rate (p.a.)
Up to ₹25 lakhs 9.49%
Above ₹25 lakh 7.99%

Let us understand how MTF interest is charged with an example. Say you want to place a trade worth ₹35 lakhs (total trade value). With m.Stock, you will get 80% funding i.e. ₹28 lakhs. As per the above slab, you will have to pay interest @7.99% p.a. Assuming you hold this position for a year, the total interest payable on this trade will be ₹2.33 lakhs (for one year). The interest levied on MTF is payable on a daily basis and is debited from your ledger directly till the time you hold the position.

As a comparison, if you availed the same funding (₹ 28 lakhs) with other broker charging 12% p.a., your total interest payable will be ₹ 3.36 lakhs i.e. ₹ 1.12 lakhs more. Hence, from an interest rate point of view, m.Stock’s eMargin makes better financial sense.

You can use our MTF calculator to calculate interest savings on your eMargin trades.

m.Stock MTF charges #2: Pledge and unpledge charges

Margin trading facility involves pledging stocks in favour of the broker. While ‘post-pledge’ (pledging after you have purchased the stock) is the norm industry-wide, it can be a hassle for investors. You see, the pledge request is sent by CDSL via email and has to be approved by 10.30 am on T+2 day. Failure to do so will result in eMargin trade being converted into delivery. As a result, you will have to pay the entire trade value within T+2 days or pay interest on debit amount at 18% p.a. till T+7 days. To avoid this, m.Stock introduced the concept of ‘pre-pledge’. Here you pledge the stock before purchasing the stock.

Now pledging and un-pledging of stocks comes with a charge. At m.Stock, the pledge charges are ₹12 per pledge request, one of the lowest in the industry (₹29). So, when you avail m.Stock’s MTF (eMargin) you also save up on pledge and unpledge charges.

m.Stock MTF charges #3: Subscription charges

Most brokers charge a subscription fee to avail their margin trading facility which can be as high as ₹10,000. But with m.Stock, there is no subscription fees and the eMargin facility comes free with your m.Stock Demat account.

While you may think ₹10,000 annual or even one-time subscription fee isn’t much, it does increase your effective rate of interest. Let us see how. Continuing with the above example, the interest rate charged by your broker on borrowing of ₹28 lakhs is 12% p.a. But when you add subscription fee of ₹10,000 in the equation, your effective interest rate increases from 12% p.a. to 12.36% p.a. Zero subscription fees is another key reason to opt for m.Stock’s eMargin facility.

m.Stock MTF charges #4: Brokerage on MTF trades

In addition to the subscription fees, most brokers also charge brokerage on MTF trades. In the above example, let’s say your broker also charges you ₹20 brokerage (on MTF trade) and you place a total of 200 orders. Now your total outflow is ₹3.50 lakhs split as follows:

  With m.Stock Other brokers
Actual interest paid ₹ 2.23 lakhs ₹ 3.36 lakhs
Subscription fees ₹ 0 ₹ 10,000
Brokerage paid ₹ 0 ₹ 4,000
Total interest paid ₹2.23 lakhs ₹3.50 lakhs
Effective rate of interest 7.99% 12.50%

As evident from the above table, your total savings when you avail m.Stock’s MTF (eMargin) is a massive ₹1.26 lakhs!

With so much savings at stake, opting for m.Stock’s MTF (eMargin) makes financial sense. You get up to 80% funding and can seize lucrative investment opportunities in 700+ stocks, whilst paying low interest rate. To avail m.Stock’s eMargin facility, simply open an m.Stock account and trade big without paying big!

Frequently Asked Questions

Margin required is similar to the down payment you pay when you opt for any kind of loan. In case of MTF, margin required is the minimum amount you must maintain in your trading account to take a position. With m.Stock, you only need to maintain 20% margin since you get up to 80% funding on the total trade value. You should always maintain the required margin to avoid your position being squared off automatically.

The interest rates levied on m.Stock's eMargin facility depends on the funding value. m.Stock charges 9.49% p.a. interest on a funding value up to ₹25 lakhs. For funding above ₹25 lakhs, the interest charged is 7.99% p.a., which is one of the lowest in the industry.

With m.Stock's MTF (eMargin) you can keep your position open as long as you want. There is no limit on the holding period. However, you will have to maintain the required margin throughout.

The interest charges on MTF are levied on a daily basis and will become applicable from the day you avail the facility.

m.Stock charges pledge fee of ₹ 12 per pledging request against an industry average of ₹20 - ₹29.

Currently, you can use MTF for the equity segment (cash market) only.

No, MTF is not applicable for intraday trading. It is available for delivery trades only. However, you are allowed to sell your shares on the same day.

If you don't maintain the required margin in your trading account, the shares you purchase will be automatically squared off. The broker will settle the balance amount after deducting the applicable interest charges.

Under MTF, interest is charged on a daily basis. Interest will be debited from your ledger at the end of each day.

m.Stock is the first broker that allows pre-pledging of stocks. However, in case of partial execution of margin trades or partial selling under MTF or CNC (Cash and Carry), you need to complete the pledge process post-trade. You are required to pledge till 10:00 a.m. on the Settlement Day, i.e., T+1 / T+2 days, depending on the settlement cycle of a pledge request. The whole process needs to be done via a CDSL link sent to you over an SMS/email.

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