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Margin Trade Facility (MTF)

Margin Trade Financing (MTF) allows day traders to trade for bigger deals than the capacity at a point in time using the borrowed funds from the broker. It is based on collateral loans against margin in cash or demat securities as per reforms by the Securities and Exchange Board of India (SEBI). In order to invest, let's first understand the Margin Trade Meaning and how it works.

Explanation on Margin Trade Financing:

MTF is the facility of trading with more than the available funds. Margin trade meaning can be understood as the availability of loans for intraday traders with stockbrokers. When you trade using Margin Trade Financing, your stockbroker funds your trade. You can buy securities by paying a part of the actual trade value. As per the SEBI, you can pay this margin amount in cash or in the form of demat securities.

Margin Trade Financing is a facility offered to the investors or traders to increase their buying power for shares and securities by just paying a small amount of total value. MTF is simply a leveraged position in the market. The investor can take higher value of position by paying only a fraction of the total transaction value called margin. Margin given by the client can be in the form of cash or shares as collateral. The rest amount gets funded by the stockbroker at a nominal Interest rate.


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How Margin Trading Works

The best way to understand about of margin trading is to see how it might play out in the real world. Suppose, Mr. X wants to purchase share whose value is Rs. 24000 and the funds available with him is only Rs. 8000. Using Margin Trading he can purchase the stock worth Rs. 24000 as he gets leverage of up to 4X based on cash and stock on his portfolio.

Advantages of Margin Trading

  • Better Investments: Increased leverage helps an investor make more significant investments, enhancing their portfolio.
  • Portfolio Diversification: Margin Trading helps investors enhance the diversification of their portfolios.

Features & Benefits of Margin Trading

  • Higher Returns:Improve the percentage return on the capital deployed with minimum capital allocation.
  • Enhance the buying power:Can avail upto 4 times the position of the contribution
  • Short term Gains:Ideal for Traders who are looking for short term gain.
  • Leveraging on Stocks:Utilization of securities available in Demat account, (using shares as collateral)..
  • SEBI Regulations:According to SEBI regulations, only corporate brokers can offer MTF to their clients. Securities allowed under MTF are pre-defined by SEBI and other Exchanges and are modified on a timely basis.
  • Bet on bigger trades:MTF allows you to bet on bigger trades than you would with available funds with you as you can leverage your position up to 4X with the borrowed amount. Alo, the MTF limit available for the trader depends on the type of asset being traded and the trade value.
  • Higher profit potential with low investments:You can purchase more shares using MTF, hence more profits provided on your trade go right as per your analysis and determined trend.
  • Safety:SEBI closely monitors this, and it continuously frames and amends the rules in the interest of traders.

Interest Applicable on Margin Trading Positions

  • The interest applicable on Margin Trade Financing are generally fixed by the stockbrokers and the rate of interest depends on broker to broker. The interest calculation again varies from broker to broker but in general rule, the calculation is mentioned below:
  • Annual Interest Rate * MTF Position Created = Output * Term of the Loan
  • Illustration: Let’s say you have availed the MTF for a period of 24days, then the amount will be multiplied by 24/365 to get the payable amount.
  • With BFSL, avail MTF at one of the lowest interest rates.

Risks Involved in Margin Trading

  • Minimum balance required: You are asked to maintain a minimum balance in your Demat account all the time. If in case your balance is below the minimum balance then you would be asked to maintain sufficient balance and if you failed to do so then you would be forced to sell the shares to maintain balance.
  • Liquidation: If you fail to keep up to the margin trade agreement, then the brokers have the right to initiate action by liquidating your assets to recover the sum.
  • Losses can be magnified: Just as the MTF facility offers the possibility to multifold profits in the markets, in the same way, the losses incurred can also be multifold which can lead to erosion of the entire collateral amount. Therefore, it is very important to assess as to how much risk you can take in the market.

Benefits you get with us

  • No documentation required
  • Easy accessibility on the platform
  • MTF Limits up to ₹ 90 crs.
  • Avail MTF at one of the lowest interest rates
  • Get up to 4X leverage on cash and shares
  • Call & Trade Support
  • Dedicated Relationship Manager

Margin Trading Faq's

No, Margin Trade Financing is a funding system which doesn’t give an option to execute Intraday trades. Intraday trading cannot be done under Product Code – MTF.

Interest on MTF depends on broker to broker. With Bajaj Financial Securities, you can avail MTF at one of the Lowest Interest Rates.To avail MTF and know more, visit: https://samadhan.bajajfinservsecurities.in/margin-trading/sub/mtf-facility

Margin Trade Financing is a facility where Investors get funded by the stockbroker in order to increase their buying power. The investors or traders can buy stocks which they cannot afford by paying a small margin amount of the actual value, it can be through cash or keeping securities as collateral. The margins later are settled when you square-off your position.

When you avail MTF from a SEBI registered stockbroker, you are required to maintain a minimum balance in your trading account. If you do not maintain the balance, your stockbroker can close your open positions inn order to bring in the minimum value which is referred as forced sale or liquidation.

Earlier, trading under MTF was allowed only with cash and providing shares as collateral was not in the picture. However, the relaxation of allowing investors to create position under the margin trading by furnishing shares as security is given by SEBI.

  • If the margin trade agreement is not kept properly, the authorised stockbroker have the right to take action against the collaterals of Investors/Traders

  • When you avail MTF, you are supposed to maintain a minimum balance in your trading account all the time. If you fail to maintain the same, the you would be forced to sell some of your securities to maintain the balance to avoid the penalty

  • Trading in margin could be profitable and sometimes lead to losses as well

  • By availing MTF, an investor or trader can enhance their buying power up to 4X times

  • It improves the rate of return on the funds invested of a trader or investor

  • The securities which are lying in the Demat account can be used as collaterals

To activate Margin Trading Facility (MTF) all you need to do is submit your POA(Powe Of Attorney) filled and signed.

what is POA? Click here to check out:

The benefits of Margin Trade Facility with Bajaj Financial securities are:

  • Hold position for up to 365 days
  • Pay interest charges only for the days used
  • Portfolio diversification
  • Low-interest rates
  • Increased investments capacity

No, you do not need to open two DPs to avail MTF facility.

To activate the Margin Trading Facility, all you need is to submit a Power Of Attorney (POA) hard copy.

No, you will not get the benefit of any MTM gain on your MTF position.

Interest will be charged from T+1 day on the Total MTF position created by the clients.

This facility is for both online accounts as well as offline accounts.

Bajaj Financial Securities Limited provides funding for the shares bought by you, you only need to pay a part of the total value of the shares bought. For Eg. : If “A” buys Infosys worth Rs.1 Lakhs, then he is supposed to pay 25%* i.e.Rs.25 thousand and a balance of Rs.75 thousand will be paid by BFSL on behalf of A. *Please Note: % of the Margin may vary from time to time and stock to stock.

  • Freedom Pack: 18% p.a.
  • Professional Pack: 12.5% p.a.
  • Bajaj Privilege Club (BPC) one of the lowest interest rates.

The margin requirement to trade under MTF differs from scrips to scrips.

Yes, one can transfer stocks to fulfill the margin requirements.

If sufficient margin is not maintained, then you will not be able to buy any shares under Margin Trading Facility.

If in case margin falls below the minimum required margin, then will make a Margin Call and the position can be liquidated. You will be notified of the same.

If you are not able to meet the Margin call or fail to transfer funds then, BFSL can liquidate the securities. When margins are not in place then Margin call/ liquidation can be made at any point in time.

A detailed report giving the Margin Trading Facility positions and the related Margins is available under Margin Report.

While you are place your order, select “Margin” as the “order Type”.

The brokerage charge depends on the subscription pack you opted for.

No, Margin Trade Facility is not for Derivative trading, this facility is only for Cash segment.

Yes, DP charges will be applicable while using MTF facility, as per the normal schedule.

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