I have pledged stocks and used the margin to trade F&O. One of the pledged stocks has declared a dividend. Where will this dividend be credited?


#1

Where will this dividend be credited to?


#2

If you are trading with Zerodha, when someone pledges stock to trade F&O, the shares get moved from clients account to Zerodha’s pool account from where it is moved to IL&FS margin account. Since the stock moves to IL&FS from Zerodha, all dividends on the stock that is pledged get credited to Zerodha’s bank account.

When the money gets credited to Zerodha’s bank account, we in turn credit it to the clients trading account with it. An entry similar to below is made on clients ledger with us. We do this credit of dividend to trading account once a week for all our clients (typically on a Thursday). So if the dividend is passed out on Monday, clients who have pledged their stocks with us might get it only by next Thursday.


#3

Is there any drawback of pledging stocks?


#4

My demat account is and was always with a cooperative bank wherein in the past i availed LAS from a mnc bank and a leading private bank. i did get all dividend in my bank account and bonus etc in my demat . my purpose was mainly for ipo application and not f&o margin.


#5

There is no drawback of pledging shares and getting money /bank guarantee for any purpose which one may desire . you have to top it up if market value of your pledged securities fall down .
in near future i may need some big value bank guarantee and i am planning to get it by pledging the shares.


#6

@Bhuvanesh @nithin
Why am I not able to pledge my stock (ECLFINANCE-NF)? There is no option to pledge it.
Can we not pledge NCDs?

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What does “Interest of 0.05% per day on any debit balance” it mean? how will it affect my margin?


#7

You cannot

Answered here:


#8

Thanks for reply… But I find the highlighted text contradicting them self…
Please clear my doubt.

isnt it? correct me if I’m wrong


#9

It isn’t contradicting,

Ex - to short option worth 70000, 35000 will be taken from your free cash & remaining 35000 will be taken from collateral margins. In case you have no free cash & you have collateral margins (after pledging & considering haircut) worth 70000, you will be allowed to open the position, but you will be charged interest of 0.05% per day on the shortfall of 35000

This applies when you have pledged securities in general.

However, Collateral margin received against pledge of liquid bees, will be considered as cash equivalent. So if you have collateral margin of Rs 70000 from pledging liquid bees, you can take a position upto 70000 and not be charged interest

This is applicable when you have pledged liquidbees/liquid etfs [as the collateral margin received after pledging liquid bees/liquid etfs are considered as cash equivalent]


#10

Thanks :slight_smile:


#11

@Kshiteesh_Saralaya
I have a situation…
I have already a position (option sell) by using cash margin (1Lac). Now I want to take one more sell position which requires 1Lac margin. Is it possible to open a new position by pledging shares having worth 1 Lac (after a haircut)?
ie a minimum requirement is 50% which is already used for another position


#12

In this situation, assuming you had 1 lac as free cash. You used the entire amount to sell options. Leaving no free cash in your account.

There is no restriction on this. However, you will be charged 0.05% interest per day on Rs 50,000. You can check out this article for detailed explanation.


#13

So in order to avoid 0.05% interest, I have to close my previous position first so I will have 2 lac in my account (1 Lac free cash + 1 Lac from pledging) then I can take both position again. Am I right?


#14

Nope, if you take both the positions again, interest will be applicable. To avoid interest you need to either keep only one open position or add funds.


#15

Sorry I got confused :frowning: after reading your answer and article
Let’s say to take an F&O position I require 2 Lac as margin but I have only 1 Lac free cash. So to fulfill the requirement for the remaining 1 Lac I want to pledge stocks (Which is 50% of the total required margin, so I can take the F&O position).
So in this case; I have to pay 0.05% per day interest on 1 Lac (Got from pledged stocks).
Am I right?
If I pledge ETFs ( say NIFTY Bees) instead of stocks then I have no need to pay any interest.
Am I right?


#16

Hey @Shivam_Gupta

Sorry, my explanation wasn’t clear. I’ll try explaining this with the same example.

Inititally,

Cash balance = 1 lac
Margin required = 1 lac

Later, you pledge holdings, and after the haircut,

Collateral margin = 1 lac

Now, when you take another position,

Cash balance = 1 lac
Collateral margin = 1 lac
Margin Required = 2 lac.

So earlier, I didn’t clearly get your example, due to which I said interest will be charged. However, in this scenario, since 50% of margin required is from cash & 50% from collateral margins, interest will not be charged.

Also, only liquidbees and DSP liquidetf are considered cash equivalent currenlty. NIFTY bees and other ETFs will not be considered as cash equivalent.


#17

If someone takes overdraft facility against shares from any bank or nbfc and use that amount to trader FnO then also concept of 50 percent of margin needs to be in cash would be applicable.


#18

Thanks for clearing my doubt…
So my question is… I have one position already by using all free cash (1 Lac) and want to open one more position which requires 1 Lac margin which I will get by pledging stocks. So in this case do I need to close my previous position and have to open both positions together or it will be adjusted to 50:50 automatically?


#19

You don’t have to close the existing position, you can just open a new one. Margin reporting happens at the end of the day, so while reporting we’ll report 50% from cash and 50% from collateral accordingly.