Potential Benefits of MTF
Margin trading increases exposure but also carries higher risk. Possible advantages include:
- Larger Market Exposure:
Leverage allows larger positions without full upfront capital.
- Efficient Capital Use:
Funds not used for margin can be allocated elsewhere.
- Flexibility in Holding Periods:
MTF positions can extend beyond intraday limits.
- Short-Term Trade Access:
Traders may access larger positions in shorter timeframes.
- SEBI-Compliant Process:
MTF follows pledging and disclosure norms laid out by SEBI.
- Strategic Use of Market Movements:
MTF enables leveraged exposure during high-activity phases.
Who Can Consider Using MTF?
MTF is typically used by:
- Traders with prior market experience
- Individuals who actively track markets
- Investors with moderate to high-risk tolerance
Avoid if:
- You are a beginner
- You are unable to monitor the market regularly
- You prefer to limit capital risk exposure
Real-World MTF Example
Ravi has ₹1 lakh and wants to buy 800 shares of ABC Ltd at ₹500/share (₹4 lakh total):
- Ravi pays ₹1 lakh (25% margin)
- ₹3 lakh is funded via MTF
- If stock rises to ₹550 → value = ₹4.4 lakh → profit = ₹40,000
- If stock falls to ₹475 → value = ₹3.8 lakh → loss = ₹20,000
Note: Leverage amplifies both gains and losses.
Margin Trading vs Delivery Trading
Feature
| Margin Trading Facility (MTF)
| Delivery Trading
|
Capital Required
| Partial (as low as 25%)
| Full upfront
|
Holding Period
| Short/medium-term
| Long-term
|
Target User
| Traders
| Investors
|
Leverage
| Available
| Not applicable
|
Risk
| Higher
| Lower
|
Margin Calls
| Possible
| No
|
Interest
| Applicable
| Not applicable
|
SEBI Guidelines on Margin Trading
SEBI governs MTF usage via the following rules:
- Only SEBI-registered brokers may offer MTF
- Written investor consent is mandatory
- Shares must be pledged on the same day
- Brokers may square off non-pledged holdings
- Transparent disclosures of charges are required
Margin Trading Charges with Bajaj Broking
Charge Type
| Applicable Rate (Plan Dependent)
|
Interest – Freedom Pack
| 14.99% p.a.
|
Interest – Professional Pack
| 11.99% p.a.
|
Pledge Late Penalty
| As per policy
|
Auto Square-Off Fee
| Broker-defined
|
DP Charges
| As applicable
|
Interest Calculation: Example
Formula:
Margin Used × Interest Rate × Days Held / 365
Example:
₹2,00,000 held for 20 days at 14.99% interest:
→ Interest = ₹2,00,000 × 14.99% × 20 / 365 ≈ ₹1,642
How to Use MTF with Bajaj Broking
- Open or log in to your Bajaj Broking account
- Search for MTF-approved stocks
- Place a BUY order using ‘MTF’ product type
- Execute trade and complete pledge by 11:59 PM
- Track positions via the platform
How to Pledge Shares for MTF
- Open the pledge link from CDSL (via SMS or email)
- Enter PAN and DP ID
- Select shares to pledge
- Complete OTP verification
Note:Pledging must be done the same day to avoid square-off.
Tools for MTF Traders
- Stop-Loss Orders
- Market Depth Indicators
- MTF Calculator
- Price Alerts
- Daily Margin Reports
Common User Scenarios
Short-Term Trader (Raj)
Uses MTF around events like earnings. Monitors positions actively.
Working Professional (Anjali)
Missed pledge once; now uses alerts to avoid late pledging.
New Investor (Kabir)
Tried MTF without risk controls. Currently reviewing investment approach.