• HDFC
• 22 May 2019
• Margin Trading Facility

HDFC, Tester

Margin Trading Facility (MTF) is a facility offered to an investor in buying of shares and securities from the available resources by allowing him to pay a fraction of the total transaction value called a margin. The margin can be given in the form of cash or shares as collateral depending upon the availability with the respective investor. In short, it can be termed as leveraging a position in the market with cash or collateral by the investor. In this transaction the broker funds the balance amount.

 

Till last year MTF was allowed against the cash margin not against shares as collateral. Now Securities Exchange Board of India (SEBI) has relaxed the said criteria vide its circular no. SCIR/MRD/DP/54/2017 dated June 13, 2017. Investors are now allowed to create a position under MTF against shares as collateral as well.

 

SEBI and Exchanges monitor tightly the securities eligible under the MTF and margin required (through cash or shares as collateral) on such securities are prescribed by them from time to time. Currently, the securities forming part of Group 1 securities are included in MTF.

 

Features of MTF:

 

• Investors who wish to avail the MTF need to undertake by signing/accepting additional Terms and Conditions. It ensures that investors are completely aware of the risk and rewards of trading in it.
• Allows investors to create leverage position in securities which are not part of derivatives segment.
• The positions can be created against the margin amount which can be in the form of cash or shares as collateral.
• Position can be carried forward up to T+N days (T = means trading day whereas N = means a number of days the said position can be carried forward). The definition of N varies from broker to broker.
• Securities allowed under MTF are predefined by SEBI and Exchanges from time to time.
• Only corporate brokers are allowed to offer MTF as per SEBI regulations.

 

Benefits for Investors:

 

• MTF is ideal for investors looking to benefit from short-term price movements in the Stock market but who may not have sufficient cash balance.

• Utilization of securities available in portfolio/demat account (using them as shares as collateral).
• Improve the percentage return on the capital deployed.
• Enhance the buying power of the investors.
• Prudently regulated by the regulator and exchanges.

 

It is of paramount importance that one should understand their risk-return profile before entering in MTF offering. It is also equally prudent that one should not get overboard on leveraged trading under MTF.

 

We at HDFC Securities Limited offer the MTF under the product category called E-Margin, wherein one can create a position both on NSE and BSE exchange. For further details please reach out to your respective Relationship Managers or call on our customer care number 39019400.