How Margin Trading Works?

You Pay

50,000 4

+

Pays

2,00,000

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=

You Can Buy Stocks Worth

3,00,000

 

 

Note: The leverage facility mentioned above will vary from one stock to another, and it is entirely at the discretion of Bajaj Financial Securities Limited to decide whether to provide leverage on any particular stock. 

 

Disclaimer: Margin Funding as subject to the provisions of SEBI Circular CIR/MRD/DP/54/2017 dated June 13, 2017 and the terms and conditions mentioned in rights and obligations statement issued by the Bajaj Financial Securities Limited. 

How to Pledge?

1. Post MTF approval, await Email/SMS notification for pledge initiation

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2. Click the CDSL link in the Email/SMS (You will be redirected to CDSL’s website)

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3. Enter PAN or Demat Account Details

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4. Select Stocks to Pledge

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5. Generate a one-time password (OTP) for authentication

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6. Enter the received OTP to Authorize and complete the process

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Margin Pledge is a mandatory process introduced by SEBI. When you purchase shares using the Margin Trading Facility (MTF), it's compulsory to pledge those shares to maintain your position. This pledge must be completed on the same day of the share purchase. Failure to fulfill this requirement will result in the forced square-off of your shares after a period of seven days from the transaction date (T+7 days).

Margin Trading: Best Practices

Do’s

Understand the Risks

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Set a Clear Strategy

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Monitor Market Trends

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Use Stop-Loss Orders

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Practice Risk Management

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Diversify Your Portfolio

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Stay Disciplined

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Dont's

Overleverage

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Ignore Margin Calls

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Chase Losses

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Trade Without Research

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Ignore Fees and Charges

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Rely on Speculation

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Trade with Emotions

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Interest Rates Applicable on MTF

Bajaj Privilege Club

One of the lowest interest rates in the industry

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Professional Pack

12.5% per annum

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Freedom Pack

18% per annum

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The interest applicable on Margin Trade Financing is generally fixed which depends on your Demat account subscription pack. 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

Let's say you have availed the MTF for a period of 24 days, then the amount will be multiplied by 24/365 to get the payable amount.
With Bajaj Broking, you can avail MTF at one of the lowest interest rates.

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Frequently Asked Questions

Are DP charges applicable while using Margin Trading Facility?

Answer Field

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

Can I use Margin Trading Facility for derivatives trading?

Answer Field

No, Margin Trade Facility is not for derivative trading, this facility is only for cash segment.

What are the brokerage charges for buying/selling using Margin Trading Facility?

Answer Field

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

How can I take Margin Trading Facility positions?

Answer Field

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

How can I check my Margin Trading Facility positions?

Answer Field

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

What if I am not able to meet the Margin Call?

Answer Field

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

What will happen if a client does not maintain minimum required margin for Margin Trading Facility?

Answer Field

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.

What will happen if I do not maintain sufficient margin?

Answer Field

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

Can we transfer stocks to fulfill the margin requirements?

Answer Field

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

What are the margin requirements while trading under Margin Trading Facility?

Answer Field

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

What is the rate of interest being charged for using Margin Trading Facility through Bajaj Broking?

Answer Field
  • Freedom Pack: 18% p.a.
  • Professional Pack: 12.5% p.a. 
  • Bajaj Privilege Club (BPC): One of the lowest interest rates in the industry.

What are the benefits of using Margin Trading Facility (MTF) facility?

Answer Field

Bajaj Broking 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 20%* i.e. ₹.20 thousand and a balance of ₹.80 thousand will be paid by Bajaj Broking on behalf of A. *Please Note: Percentage of the Margin may vary from time to time and stock to stock.

For whom is Margin Trading Facility available?

Answer Field

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

How & from when interest will be charged in case I have created position in MTF?

Answer Field

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

What is the benefit of Margin Trading Facility?

Answer Field
The benefits of Margin Trade Facility with Bajaj Broking are:
  • Hold position for up to 365 days
  • Pay interest charges only for the days used
  • Portfolio diversification
  • Low-interest rates
  • Increased investments capacity

Advantages of Margin Trading

Answer Field
  • By availing MTF, an investor or trader can enhance their buying power up to 5x 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

Risks Involved in Margin Trading

Answer Field
  • 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

SEBI Regulations Regarding Margin Trading

Answer Field

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 I fail to maintain the required margin then?

Answer Field

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.

How Margin Trading Works?

Answer Field

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.

Can I execute intraday trades under MTF?

Answer Field

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.

How to Activate Margin Trading Facility?

Answer Field

Margin Trading Facility is available for everyone. While buying stocks select MTF as a product type. Once the trade is approved, you are required to pledge the shares.

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