No, we don’t allow FD.
Ok no FD and I read on internet that liquid ETF are better than liquid funds …so can you please suggest a liquid ETF that you would prefer and that can be used as a collateral to get margin?
You could buy either Liquidbees or LiquidETF, they both are almost the same. These are the trading symbols, you can search for it on Kite.
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Just an opinion …you should accept FD …they call it lien FD …I know u said its not a digital format but think from a client’s perspective …those liquid bees/etf generate hardly 2% interest …while FD at least 6% …may be you should a charge little extra for courier/admin fees but think about it.
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@siva-reddy @nithin
Currently in case we pledge LiquidBees there is no need to hold 50% in cash for taking F&O positions. Is this also the case if we pledge liquid MF’s or any other instrument apart from LiquidBees ?
Yes liquid mutual funds are also similar to liquid bees.
Hello,
U said when you provide margin for FNO against securities, you pledge to NSCCL and you don’t charge any interest.
You don’t charge any interest because NSCCL does not charge any interest to you? so you pass on zero interest margin to client ? I guess so…
I am kinda curious as to why NSCCL does not charge any interest to you? Just curious…no pun intended.
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They are giving margins which help generate trading turnover, which generates transaction charges and brings in liquidity to the exchanges.
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Hey @Bhuvan Zerodha is currently providing pledge against liquid funds and not overnight funds which are more secure than former. However small but credit risk is prevalent in liquid funds.
Are you planning to include overnight funds in the list over liquid funds which can be used to pledge for margin?
Thanks!!
Oh is it… Thanks for info.
I will look into it.
HI Siva, I understand you dont allow FD. But why not? Looks like some experienced traders are using this method to use the money in their FD to make trades in their brokerage account. It may not be possible for 1L or 2L accounts but you should start looking at for larger accounts, say 5l or more. numbers are just for illustrative purpose only.
I dont want to take a risk of losing the capital by investing in funds (overnight, liquid, debt, equity). There is always a risk with the funds on top of options trading risk. FD will sort out most of the collateral related issues for options writers.
PLEASE!!!
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Yeah that what I meant but they Zerodha including @nithin said its not convenient …and I asked further if you can explain your side (I mean what exactly you have to do differently) …I also suggested if its more problematic may be you should consider charging some courier fees/admin fees to accept FD as collateral…one thing I am quite sure that money/fund supplier NSCCL - NSE clearing limited does not mind accepting FD as collateral. And here is . how FD Is made - NSCCL/Zerodha or NSCCL/broker …that means made in favor of NSCCL/broker but client continues to earn interest. They have claim only if client defaults or don’t have enough margin.
Few banks insist on minimum amount, if I am not wrong HDFC asks for 25 lakhs as minimum to avail this option. Also this process is not online, even to stop this it involves physical submission of documents, we being online broker and considering our client base we can’t offer this.
One can buy liquid bees and keep that as collateral, this comes with much less risk, I believe.
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To start with few banks will ask for minimum amount to maintain to offer Third party FDR, few can start with 25lakhs and few more than that. So, FDR will be on NSCCL broker name, Bank need to give some letter in standard format addressing to NSCCL, so one has to submit this FDR and letter to broker and broker has to pass them to NSCCL. Also when one want to stop using FD as collateral they need to inform broker and in turn broker will inform exchange and they need to give back FD certificate along with no objection certificate, once broker received those he will pass those to client. All this is physical process, documents has to be collected manually and need to pass to exchange.
As I said few banks offer third party FDR only with minimum balance as it involves more work for them and few traditional brokers offers this and they start with minimum of 1 cr, not everyone. Traditional brokers offering this has business sense, they have physical presence across the country and they charge much higher as brokerage and in other charges.
Coming to us we are online broker who runs all operations centrally wholly backing on technology, also almost our client base is retail and very tiny % of our clients has crore or above to start with. We don’t offer different brokerage or leverage plans,keeping a simple structure along with technology( centralized/online/platforms) helped us reach to the spot where we are now.
So, as this is an offline process and it is operationally painful, we may not consider this till exchanges make this process online, also in the first place banks will allow third party FDR with minimum balance (HDFC 25 lakhs).
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Makes sense…but I am scared of so called safer funds as there is always a risk. It is applicable to FD also but to some extend it is protected by gov.
When can we have the facility to pledge equity mutual funds?
Can anyone from Zerodha answer plz???
Once the new pledging mechanism goes live from August 1st, we will allow.