I pledge stocks and use margin on it to trade F&O. How will interest charge be calculated?

are fixed deposits still permissible …if yes …do have to go to bank and ask them to make FD in zerodha’s name for example? …or it has to be made like this NSCCL/zerodha or any broker ?

Permissible but many not entertain them, at Zerodha we don’t.

Ok…so what are other options for collateral apart from equity ?if mutual funds…what type of mutual funds? Basically I dont want to pledge that has some appreciation and I believe you don’t charge any interest because you pledge directly with NSCCL correct?

Check this, as of now only liquid mfs.

So because of volatility in market you current dont accept equity for pledge ? or you have stopped it for permanently? And when we pledge …who has the control over pledge …you at Zerodha or NCSSL?

Who said that? I am referring about mutual funds in above reply as you are asking about mfs, btw read this for more info. Also read this for more info how pledging works and risks involved.

2 questions:

  1. How do some brokers provide limits for fno carry positions against shares in dp without the need to pledge them as in the case of zerodha

  2. I understand that if the 50% is an exchange requirement then any shortage should lead to penalty along with interest as individually all clients’ margin files are uploaded on exchange unlike earlier

This is not at all allowed, not sure which broker is offering this.

Din’t get this one, can you elaborate,please.

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Dear Siva,

On first point, a lot of brokers including big ones provide limits and margin without explicitly need to pledge securities. They can be considered as margin when they are lying in the demat account itself when Poa is active.

2nd Question: What I meant was since this 50% cash is an exchange rule, if the client maintains 100% share collateral, Zerodha says that on 50% interest will be charged by Zerodha as Zerodha has to contribute for the cash. But to the best of my understanding now each client’s margin file is uploaded in exchange. So if 50% cash is not maintained, doesn’t the exchange charge penalty, how can Zerodha contribute instead of individual client.

Yes, limits can be provided against the stocks lying in a PoA account, however such margins are given out of the broker’s own books. In our case, since the stocks are pledged with the Clearing corporation (CC), we receive margins from the CC which is then passed on to the respective client

There are 2 things to be considered while margin reporting - 1. The availability of margins in the client’s account (in any form) and 2. Maintaining margins in the cash:collateral ratio of 1:1. When the Exchange blocks our margins, it’s the collective sum of margins of all our clients in a 50:50 cash/cash equivalent: collateral ratio. Margin reporting always happens at the client level. Hence, if a client doesn’t have sufficient cash but has only collaterals as margins, although the margins get reported as full (which means no Exchange penalty), Zerodha would charge interest since Zerodha would have blocked its own cash to fund this client’s margin obligation.

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Kind request to provide some additional clarification:

The 50:50 rule is for all mcx, currency and nsefo

Also when we pledge shares the margin is common across these 3 segments?

And once we maintain 50 in shares and 50 in liquid fund(cash equivalent) can m2m credit be withdrawn on t+1

No it is applicable to only nfo/cds and not for mcx.

Yes.

So for mcx i can maintain 100% shares and no interest would be levied?

And what about second question- is the margin common across the 3 segments or I need to have different margins for different segments

I have answered already, for nse it is applicable but not for mcx.

Dear sir

I did not get answer for the margin part.

Is it common across segments or i need to pledge separately

Same for all nse segments.

Thanks a lot. So i understand will have to do separately for mcx

Thanks

No collateral trading is there for mcx, only cash.

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You plan to start it?

Sorry but I didn’t know this.

I want to move a large position. I have already opened account.

Exchange and Other brokers allow this and hence I thought zerodha would also allow.

I am ok to provide liquid fund also 100% for mcx

We are working on having single ledger for both mcx and eq then this will be possible, as of now we don’t offer, single ledger can take some more time.

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