Margin Trading Funding(MTF)
We promise money in your account in just 4 hours
Unlock quick capital without liquidating your assets
What is Margin Trading?
Margin Trading Facility (MTF) is an investment facility that enables investors to buy shares by paying a fraction of the total value upfront. This fractional value is called margin, which is provided against clear credit balance in the investor’s trading account. The remaining funding is provided by the broker, for which they charge interest depending on the tenure of the borrowing. MTF is also known as Pay Later (MTF). It helps investors take bigger positions by getting extra funding from brokers.
To understand how MTF works, let us consider an example. Say you want to buy shares worth ₹30 lakhs, but you only have ₹6 lakhs in your trading account. Normally, you will not be able to take this position. But with MTF, your broker will give you a loan of ₹24 lakhs, helping you place the trade. In exchange for this loan or funding, your broker will charge you interest for as long as you hold your position. The interest charged varies from broker to broker and can go as high as 24% p.a. In the above example, let us assume you use m.Stock’s Pay Later (MTF) where the interest charged on borrowing of ₹24 lakhs is 14.99% p.a. Assuming you hold your position for 1 year, the total interest charged on this trade will be ₹3,9,760 (₹24,00,000*14.99%). This is how MTF works. Let us now look at the features of MTF.
Features of margin trading facility
With MTF, your broker is only lending you the funds to buy stocks. You do not own the stocks as they are pledged with the broker.
MTF is a leveraged product where you are buying shares beyond your purchasing power. This means both your profits and losses are multiplied (due to leverage).
MTF is mostly used in delivery trades. The logic being that in the case of F&O, you are always concerned about expiry and settlement. But MTF allows you to hold your position in cash, without any holding period restrictions.
Since it is a leveraged product, MTF is offered in select stocks only. The Securities and Exchange Board of India (SEBI) identifies the securities where MTF is allowed.
Our Legacy in Numbers
Benefits of Margin Trading Facility
Eliminates The Issue Of Inadequate Capital:
Lack of capital is a common complaint among investors who want to seize market opportunities. But with MTF, you can undertake a large position by paying only a fraction of the trade value upfront. As we saw in the earlier example, you can take a position of ₹30 lakhs against a margin of ₹6 lakhs in your trading account. However, a majority of brokers cap the funding percentage to 50-70%. But with m.Stock, you get as high as 80% funding at one of the lowest interest rates starting at 6.99% p.a.
Higher Profit Potential:
MTF is essentially a leveraged product. This means you can multiply your gains without actually paying 100% of the trade value. For instance, assume you want to place a trade for ₹30 lakhs (buy 2,000 quantities of XYZ Ltd. for a share price of ₹1,500). You will need to maintain a margin of ₹6 lakhs against broker’s 80% funding of ₹24 lakhs. Now assuming the stock moves up by 20%, your profit is a whopping ₹6 lakhs. But if you had not taken the funding, then you would have bought only 400 shares and your profit would be limited to ₹1.20 lakhs.
List of Documents Required for Loan Against Securities
Online Journey
- PAN & Aadhaar Card details
- Mobile No. linked to Aadhaar card
Offline Journey
- PAN CARD
- ID : Aadhaar Card / Passport / Driving Licence/ Voter ID
- ADDRESS : Aadhaar Card / Passport / Driving Licence/ Voter ID
- SIGNATURE : Pan card / Passport / Banker sign verification
- ID : Aadhaar Card / Passport / Driving Licence/ Voter ID
- ADDRESS : Aadhaar Card / Passport / Driving Licence/ Voter ID
- SIGNATURE : Pan card / Passport / Banker sign verification
Any two of Following (Should contian address on the documents)
- Registration Certificate
- Certificate/ license issued by the Municipal authorities under Shop & Establishment Act
- CST/VAT/GST Certificates
- Complete Income Tax Return in the name of the sole proprietor with Firm Income
- Sales and Income tax returns
- ID : Aadhaar Card / Passport / Driving Licence/ Voter ID
- ADDRESS : Aadhaar Card / Passport / Driving Licence/ Voter ID
- SIGNATURE : Pan card / Passport / Banker sign verification
- Partnership Deed
- Registration Certificate (only in case of registered Partnership Firms)
- PAN of the partnership firm
- LLP Resolution (if LLP)
- Authority Letter from Partners
- ID : Aadhaar Card / Passport / Driving Licence/ Voter ID
- ADDRESS : Aadhaar Card / Passport / Driving Licence/ Voter ID
- SIGNATURE : Pan card / Passport / Banker sign verification
- Certificate of Incorporation
- Memorandum & Articles of Association
- PAN of the Company
- Board Resolution
- ID : Aadhaar Card / Passport / Driving Licence/ Voter ID
- ADDRESS : Aadhaar Card / Passport / Driving Licence/ Voter ID
- SIGNATURE : Pan card / Passport / Banker sign verification
- Registration Certificate
- Trust Deed
- PANCARD of Trust
- Trust Resolution
- ID : Aadhaar Card / Passport / Driving Licence/ Voter ID
- ADDRESS : Aadhaar Card / Passport / Driving Licence/ Voter ID ;
- SIGNATURE : Pan card / Passport / Banker sign verification
- Hindu Undivided Family Letter (Annexure 2) signed by All Co-parceners
- PAN Card of HUF
- Bank Statement of HUF as a Address Proof
- CA Certified Letter confirming all Co-parceners
- HUF Authorisation letter signed by All Co-Parceners