Does value of pledged collateral change?

  1. Assume I pledge liquid funds worth 5 lacs and the collateral margin after haircut is 4,50,000. I keep using this to trade through out the year. Say at the end of a years time the liquid fund value has appreciated to 5.25 lacs. Will the collateral margin be proportionately increased automatically? If yes, is the value increased daily/weekly/monthly?

  2. The pledge form says " * Interest of 0.05% per day on any debit balance." what does this mean?

  3. If a trade where I’m writing options requires a margin of say 5 lacs and my collateral margin is 4.5 lacs. Would the system first use the collateral margin and then fulfill the shortfall using cash margin?


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The collateral value will change according to NAV.

If your account results in debit balance, ie. The cash in your account goes in negative there is interest charged at 0.05% per day.

Also, for overnight positions as per exchange, minimum 50% margins should be funded in cash and remaining 50% from collateral. If you don’t have enough cash in your account to meet this requirement then also you will be charged interest of 0.05% per day.

Eg. In your account, you have 50k cash and 2 lakhs in collateral margin.

You are taking overnight position which has margin requirement of 2 lakhs, of this minimum 1 lakhs should come from cash and remaining from collateral.

Since you only have 50k in cash and aren’t meeting 1 lakhs cash requirement, remaining 50k will be funded from collateral, on this there will be interest charged at 0.05% per day.

PS: Liquid Mutual Fund’s, Liquid ETF’s are considered as cash equivalent, you can check this list for more.

If you have pledged these securities for margin, this 50:50 Cash - Collateral requirment doesn’t apply.

You can take the trade, but as I mentioned above for overnight positions minimum 50% of margins should come from cash and remaining 50% from collateral. As you will be using 2 lakhs extra collateral, you will be charged interest at 0.05% per day on this.

If you have margin recieved from pledging Liquid Mutual Fund’s or Liquid ETF’s, since these securities are considered cash equivalent, this 50:50 rule won’t apply here.


So the collateral margin value available will change daily?


Yes, the value is updated daily.

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Thank you

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is there any interest on collateral margin daily? i have seen 0.05% interest dail.

There is no interest for using collateral margin. However, for overnight F&O positions, you need to maintain minimum 50% margins in cash or equivalent and remaining in collateral margin. If you use collateral margin > 50% then interest will be applicable at 0.035% per day on excess collateral used.

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