Hi,
Was researching on the best practices to protecting against fraud.
Was wondering,
For a trader, is it safer to invest your capital (say in liquidbees) and pledging it and trading with the collateral margin vs leaving the capital as idle cash with the broker ?
In the first case i understand with the new SEBI regulation even if a broker goes bankrupt you positions are safe as it would have never left your demat. Where as in 2nd case, you may lose your entire capital if the broker goes bust.
Itâs better to buy something and pledge atleast it will be with exchange or someone, if u keep idle and broker goes burst then no one owns ur money its gone
Was doing some additional research, looks like there is something called âInvestor Protection Fundâ under which they cover a risk of upto 25L per client in case the broker defaults. @nithin is this correct?
I am not a Trader and hence, this reply might not be appropriate.
Why dont you move from your normal bank account only that portion that you would require to do a trade on a day. I am sure you will have a notional idea of how much money you might need on any specific day. You could do NEFT or RTGS on a daily basis to your trading account. If you find surplus more than your benchmark set, move it back by end of day. Nowadays NEFT, IMPS and RTGS are 24/7.
Again, I have no clue as to how zerodha operates as I am with icici direct. This is only my personal opinion
Daily transfer of capital to trading account account will result 70k per txn (unless you are on IDFC)
When you take out the capital it will get deposited in your savings account next day only around noon.
Overall it will be very convoluted and inconvenient.
I am quite convince best bet is to invest the money , pledge the holdings and trade on collateral.
I typically leave 20% of my capital in cash, 30% in cash instruments, 50% in non-cash instruments.
70K = 70,000 per transaction???. Is there a typo in here? My experience is that NEFT/RTGS/IMPS for me from my banks is absolutely free 24/7. I get credit into the benificiary accounts within a span of half hour max. Not sure what arrangement Zerodha has though.
@nithin@siva this doubt i always have with me , if i pledge stocks worth 10 lakhs , if the broker face any trouble means , how my pledge shares will be safe , broker can sell and took our money is possible , can you please clarify how about pledging colleterial is safe with broker
As per the new pledging mechanism by SEBI, the securities doesnât leave your Demat account even when they are pledged; Instead, a pledge is marked in favour of the broker. The broker is required to open a separate Demat account labelled âTMCM â Client Securities Margin Pledge Accountâ for this purpose (TMCM stands for Trading Member Clearing Member). The broker then re-pledges these securities in favour of the Clearing Corporation and obtains margins.
In this way, the Broker wonât be able to misuse the clientâs securities as they wonât be leaving their Demat.