Brokers who accept MF as collateral

Hi,

Can you suggest brokers who accept mutual funds as collateral for trading margin? It would be good if they don’t request 50% cash collateral at client level (I understand that they have to maintain at broker level).

I have pledged Mutual Funds with Zerodha and Zebu. Finvasia and Upstox don’t accept mutual funds as collateral. Issue with Zerodha is that they expect 50% cash collateral. Issue with Zebu is that they charge per lot and not per order, so it’s expensive.

Can you suggest some discount brokers who accept mutual funds as collateral and don’t expect cash collateral?

Thanks,
Arun

@arunt Motilal oswal is accepting all mutual funds , no need to maintain 50:50 ratio cash colleterial , i am trading with them also , i am trying to move from zerodha completely to motilal

I don’t think so that is allowed, this rule is not set by Zerodha but by regulators.

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@siva i am trading there , there is no rule like that currently, i dont know about future

You can check this.

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@siva rules are there , SEBI also told don’t misuse client securities , KARVY and Bima wealth are looted the client money and they give trouble to client and their own company also ,
good also there , currently there is no cash colleterial requirement in motilal oswal , if you have doubt about this just call motilal oswal customer care

i am holding 10 lakhs worth of stock and mutual fund in motilal , there is no liquid or money market funds in motilal oswal in my portfolio , i am trading option segment equivalent to 7 lakhs every month n motilal , there is no problem at all

if you have any doubt just call motilal customer care

I am not doubting what you say, I am just saying we are going by the circular.

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@siva you go with circular there is no wrong , i will choose with benefit there is no wrong , even motilal also controlled by SEBI ,

Agree, user can choose what suites him the best.

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Also how much brokerage you pay there?

A broker is required to keep 50% of whatever position is taken in cash. If a broker is not taking cash from you, it means they are putting their own cash or funding it. There are two ways to recover this funding cost, either charge higher brokerage or recover the cost of funding.

In our pricing model, we recover the cost of funding by charging interest. Traditional brokers charge a % brokerage, so they can recover this cost from the value of your trade. There is no way around this. You either pay flat brokerage and funding cost, or you pay % or per lot brokerage and no funding cost.

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I personally dont trust MOSF. They have some very public and scary fraud ‘allegations’ levelled. This one I noticed early on. Like they pick on individual accounts.

It had a big impact on me. Every time I see or hear their name, a quiet shiver runs down my spine.

Brokers are largely dishonest, black sheep of society, very little humanity, most don’t have the fear of God(or the law) you could say. But mosf spook me more than others somehow.

I was checking another broker’s website and they also openly mention about this practice -

Given that multiple audits of brokers are done by various exchanges, why aren’t these brokers penalized by the exchanges for such practices? Is it due to their smaller client size, they are given some leeway?

How is Zebu?

Hi @nithin & @siva ,

Thank you for response.

Do you mean to say that you charge interest on shortcoming of cash limit during billing? Do you mean if I trade for 1,00,000 and I have 30,000 in cash and enough collateral in non-cash segment; you charge interest on 20,000? If so, what is the interest rate you charge?

I understand that there is a need to have 50% cash for all the trades done from a broker. Some brokers say this cash limit is not per client. So they say cumulatively they can manage with cash from other clients.

Thanks,
Arun

@bhuvanesswazri

Zebu charges per lot and not per order. The platform of Zerodha is better than Zebu. The customer support is good in Zebu. Zebu provides NEST trading terminal for trading.

Zebu doesn’t allow buying direct mutual funds. Zerodha coin is a very good platform for buying mutual funds. But there are ways to buy mutual funds in any demat account (like using MFU platform).

In summary, if you trade less number of lots per order and need convinience, choose Zerodha over Zebu. If you are an high networth individual wanting to deploy all of your money into mutual funds, pledge them and get margin for trading in large quantities, choose Zebu over Zerodha.

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Zerodha users also have free cash lying in their accounts on which they get 0% interest. Don’t you use that free float as well free of cost but charge 18% pa to other users who have less than 50% cash for their margin trades?

So you earn 18% pa free of cost without even putting you own capital. And in previous posts you yourself have admitted that zerodha does earn money on the free float and this contributes a good chunk around 15-25% to your business income.

Its not that I am saying that you are doing anything wrong, but just wanted to share a more comprehensive picture.

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Ok Sir. Thank you for input provided. Its useful review.

You can check this post by Nithin on float income, percent of float income share to business is coming down rapidly due to several regulations.

Broker puts his own funds in those cases as after SEBI recent rule says client money can’t be used to fund for other client shortages.

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Yes and it will be .05% per day.

That was earlier but currently other client funds can’t be used to fund shortage for different client.
Broker only will fund shortage with his own funds and charge interest or collect it from charging high brokerage.

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