Margin Against Shares

Posted on 5th May 2016
by Admin


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What is Margin Against Shares (MAS) or Pledging a stock or Loan against Securities (LAS)?

Margin Against Shares or pledging a stock is a loan towards shares in your demat account as margin money to trade in future and intraday. If you have shares in your demat account, your money is locked till you sell the shares, you can pledge these stocks to get trading margins for F&O or Intraday trades.

When you request MAS, there are specific rules define by each broker, so you have to check with your broker what scheme he is providing against MAS.

Key points to know are:

  • Client must have demat account with broker.
  • Haircut is the arbitrary reduction in the value of a security to calculate the risk cover. A % haircut will be applied which calculate collateral margin over holdings. A haircut of 10% would mean that if you pledged stocks worth Rs 1 lakh, Rs 90,000 (90% of 1 lakh) will be added as collateral margin to your trading account.
  • Cash to collateral ratio is maintain at 50:50 which means 50% of the margin needs to compulsorily come in cash and the remaining 50% can be in terms of collateral margin.
  • You can use this facility for equity intraday and equity future and for writing Options of equities, indices, and currencies. You will not be able to use this margin to buy Options or take further positions on the equity segment.
  • There can be special charge by broker to place a pledge and un-pledge request. This amount varies from broker to broker. Like RKSV charge Rs 50, Zerodha charge Rs 60.
  • There are specific securities which can be pledged. You need to review list of securities with your broker.
  • A stock once pledged will stop showing up in holdings on the trading platform and you will not be able to sell it unless you unpledge. However, you are entitled for all corporate actions on your securities like bonus issue, stock split, dividend etc.

How MAS actually works? How much fund will be available for trading?

Lets take an example:

Client at a certain broker holding following securities in his demat account:

    XXX -100 Shares
    YYY - 1000 Shares

If he wants to pledge 1000 Share of YYY which are trading @100 Rs per share in order to take a position in NIFTY future, value of his pledged request will be

    1000 * 100 = Rs 100,000.

If applicable haircut on pledged request is 25% that means Rs 25,000 broker keep for risk cover and release 75,000 for collateral margin. This amount will show as collateral value in your account.

How to use MAS fund?

Assume client want to invest in 3 lots of NIFTY future which require Rs 136,000. As per broker cash to collateral ration 50:50, Rs 68,000 can be used from collateral value and Rs 68,000 is required as cash in your account.

If client doesn't have enough cash, then either the order may not execute or the broker is going to charge interest per day for the debit balance in your account. Some brokers provide debit balance with interest and some brokers doesn't allow to trade.

What if I incur losses in trading using my collateral margin?

    If you start running trading losses on F&O using collateral margin, and don't provide the requisite marked to market (MTM) additional capital, the broker will have the right to square off your pledged holdings to make up for the losses.

Does the value of the collateral varies everyday based on the underlying value of the pledged holdings?

    Yes, the margin given will change every-day based on the value of collateral.

Can I pledge bank fixed deposits / RBI t-bills / govt. securities / bonds also?

    Usually not, but you can further check with your broker.

How to get collateral money in your account?

    To avail MAS facility, clients need to contact broker to release collateral money against his securities. Some brokers provide this feature online and some brokers accept only email request.

How much time if will take to get collateral margin for trade?

    If client is requesting for collateral margin, there is some cut off time for each broker, if your request arrive before that time you will get the collateral margin in T+1 day. Like Zerodha its 4:00 PM, RKSV its 3:00 PM. After pledge process, relevant stock will be debited from the account until unpledged.

How much time it will take to get stock back in demat account or after unpledge?

    It will take T+1 day after unpledged request before cut-off time with broker. For Zerodha its 2:00 PM, for RKSV its 3:00 PM.
Margin Against Shares comparison table for RKSV, Zerodha, SAS Online, ICICI Direct, TradeSmartOnline, MyValueTrade, Sharekhan and Kotak Securities
  Haircut Pledge/Unpledge
 Cost
Cash:Collateral - Ratio Short Case
(Not able to have 50% cash)
pledge/Unpledge Request Collateral margin
 request cutoff time
Unpledge Request Cutoff time Fund or Stock availability
RKSV By Script or 25%
whichever is higher
Rs 50 50:50 Not allowed - Order Reject By Email 3:00 PM 3:00 PM T+1
Zerodha By Script Rs 60 50:50 Allowe order with 0.05% Intrest PD on debit amount. By Email 4:00 PM 2:00 PM T+1
SAS Online By Script or 25%
whichever is higher
Rs 99 25:75 Not allowed - Order Reject Online 3:00 PM 2:00 PM T+1
TSO By Script Rs 60 on Pledge only 40:60(For Intraday)
50:50 (All others)
Allowe order with 0.05% Intrest PD on debit amount. Online 4:00 PM 2:00 PM T+1
MyValueTrade By Script Min 50 or .02% Online 4:00 PM 2:00 PM T+1
ICICI Direct By Script 0.03 % or minimum of Rs. 50/- Online 4:00 PM 2:00 PM T+1
Sharekhan By Script 0.02% or Rs.15/- per transaction whichever is higher 4 times Online 4:00 PM 2:00 PM T+1
Kotak By Script 0.05% or Rs.30/- per transaction whichever is higher 6 Times Online 4:00 PM 2:00 PM T+1

Conclusion: With MAS, you can use your long term investment as cash value for day to day trading of course with some limitations. Please read complete brochure for more information and details of charges, cash vs collateral ratio and list of securities.

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User Comments

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3. N Kumar  May 18, 2016 11:21:11 PM IST Reply
Hi ,
I am looking for low brokerage charge in Equity cash and FNO Equity with good leverage amount with T+5days option.
Kindly let me know which firm provided this option.
avatar
3.1. Vijay  May 18, 2016 11:22:33 PM IST
Thanks for your enquiry. Non of the discount brokers are providing T+5 day leverage, if you want to go for T + 5 day leverage you need to open account with Fullservice brokers like Sharekhan, ICICI Direct or Axis Direct.
avatar
2. kunal  Sep 16, 2016 1:57:07 PM IST Reply
Can you tell me which broker provides margins for all equities in intraday.
not only for blue chip equities but for all

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