MTF Pledge v/s Margin Pledge

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'Margin' is a term that a trader comes across several times in a day. But what exactly does Margin mean? Let’s decode. A margin is a security or a specific amount which a trader is required to deposit with the broker before executing a trade. The Securities and Exchange Board of India (SEBI) stipulates the margin amount. Margin pledge is when you use the securities in your Demat account to gain additional margin. Securities are the ones currently available in your account. One can pledge these like collateral while applying for a loan.

A newbie trader may not be aware of the complex terminologies and their applications in the stock market and often need help in identifying the difference. One such example is how MTF Pledge differs from Margin Pledge. There is always a lot of confusion about how exactly the MTF Pledge different from the Margin pledge.

Let’s help you learn the striking difference between Margin Pledge and an MTF pledge.

CharacteristicsMargin PledgeMTF Pledge
MeaningMargin Pledge meaning is simple - traders can pledge their Demat account securities as collateral to avail extra margin. A pledge margin works similarly to a collateral loan.The Securities and Exchange Board of India (SEBI) has mandated that if a trader purchases shares under the Margin Trading Facility (MTF), they must pledge their shares to continue holding their position.
Where to use it?A margin pledge is used against existing securities in the Demat account.The MTF Pledge is used against the shares purchased under MTF.
What is the timeline?Traders can use margin pledges whenever they seek to avail of additional margins.Traders must pledge the securities purchased under the margin trading facility before 9 p.m. on the day the purchase is made.
What if you miss the timeline?You may pledge the securities anytime, according to your margin requirements.If you miss pledging the securities purchased under the margin trading facility before 9 p.m. on the day of purchase, your position will get squared off automatically on the T+7 day.
Which securities can be pledged?The following approved securities can be pledged under the margin pledge.
  1. stocks
  2. Mutual funds
  3. Sovereign Gold Bonds
  4. Exchange-traded funds
Only approved equity shares can be pledged under the MTF pledge.

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