Margin Against Shares (MAS) or Loan Against Securities (LAS)

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Margin Against Shares (MAS) 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 Futures and/or 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 defined by each broker, so you have to check with your broker what scheme he is providing against MAS.

Key points to know are:

  • The client must have a demat account with the broker.
  • A 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 a collateral margin to your trading account.
  • Cash to collateral ratio is maintained 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 a special charge by a broker to place a pledge and un-pledge request. This amount varies from broker to broker. Like Upstox charge Rs 50, Zerodha charge Rs 60.
  • There are specific securities which can be pledged. You need to review the 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 unpledged. However, you are entitled for all corporate actions on your securities like bonus issue, stock split, dividend etc.

Margin Against Shares comparison

Margin Against Shares comparison table for Upstox, 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
Upstox 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 the complete brochure for more information and details of charges, cash vs collateral ratio and list of securities.

Last updated on 30th Jul 2019

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FAQs

  1. How Margin Against Shares actually works?

    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, the 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 brokers keep for risk cover and release 75,000 for collateral margin. This amount will show as collateral value in your account.

    Discuss this question

  2. How to use Margin Against Shares 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 does not 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 does not allow to trade.

    Discuss this question

  3. 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.

    Discuss this question

  4. Does the value of the collateral vary everyday based on the underlying value of the pledged holdings?

    Yes, the margin given will change everyday based on the value of collateral.

    Discuss this question

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

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

    Discuss this question

  6. How to get collateral money in your account?

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

    Discuss this question

  7. How much time it will take to get collateral margin for trade?

    If the client is requesting for collateral margin, there is some cutoff time for each broker, if your request arrives 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.

    Discuss this question

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

    It will take T+1 day after unpledged request before cut off time with a broker. For Zerodha its 2:00 PM, for Upstox its 3:00 PM.

    Discuss this question

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User Comments

avatar
3. subhashis bag  Dec 6, 2018 2:27:19 PM IST Reply
who is providing MF collateral as margin for option selling?
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
avatar
1. 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
4.1. 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.






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