Migration from old pledge to the new pledge mechanism

[r95990]

@r95990

n these difficult times of 100% margins, I request you to speed up the process of accepting exchange approved corporate bonds for margin. Request @siva @nithin also to kindly expedite the process.

@r95990

@Nakul

@r95990 this will require some more time as we are running a few tests. We’ll be able to give you a definitive timeline only by next week.

Any update!

@Nakul
@siva
@nithin

[Mr_M]

How tax syste. Works in pledging, its off market transaction

[nithin]

@Mr_M

How tax syste. Works in pledging, its off market transaction

When you transfer money from your bank to your friend and get the money back, the money received back isn’t an income. In the context of taxation, the old method of pledging where shares moved from your Demat to broker Demat, worked exactly the same way.

[Mr_M]

Ok it mean , in old pledging system , share from my demat to broker, and unpledge broker to my demat , was consider as off market transactions.
Income tax dept recently introduce AIS, TIS instead of 26AS, AIS show clear view of all transactions, which was not available ever before to us., So its first time i am able to see off market transaction due to pledge,

[bshubhranshu]

@MohammedFaisal any luck on pledging the REITs/InvITs with CC?

[r95990]

@nithin
As per NSE Circular Ref. No: 0138/2020 or Download Ref No: NCL/CMPT/45759, Dated: September 21, 2020,
which contains a list of all financial instruments accepted for margin pledge.

Does Zerodha accept all the securities available in the list to be pledged for margin or does Zerodha hand pick some of them?
I hold some Instruments mentioned in Annexure 6 which I find missing from to pledge.

[Nakul]

@r95990

@nithin
As per NSE Circular Ref. No: 0138/2020 or Download Ref No: NCL/CMPT/45759, Dated: September 21, 2020,
which contains a list of all financial instruments accepted for margin pledge.

Does Zerodha accept all the securities available in the list to be pledged for margin or does Zerodha hand pick some of them?
I hold some Instruments mentioned in Annexure 6 which I find missing from to pledge.

We do hand pick certain securities based on the limit available for us (set by the clearing corporation). Also, corporate bonds have certain other restrictions w.r.t the amount of cash to collateral that needs to be maintained. Have explained more here:

Migration from old pledge to the new pledge mechanism

There’s an issue in allowing these bonds for pledging. The clearing corporation requires us to have 90% in liquid assets. This means that you’ll also need to have 90% in cash of the margin required for your positions when you use collateral margin received from pledging corporate bonds. In other cases, this ratio is 50-50 i.e., out of the margin required at least 50% has to come in cash and liquid assets, and the remaining 50% can come in the form of equity collateral. [image]

[r95990]

@r95990

As you mentioned earlier about pledging of corporate bond, your say was that we have to maintain a 90:10 cash - non-cash ratio.

But a person from a different broker says that 50:50 is the cash - non-cash ratio and it should not exceed the total cash ratio of the member.

For Example.
Zerodha as a member maintains 100 crs as cash collateral and 100 crs as non cash collateral with the Exchange/CC,
The total eligible value of corporate bonds the member can pledge is 10 crs (10%of 100crs cash component) and additional 10 crs non-cash component has to be maintained.

Request you to kindly reconsider and approve these securities for margin.

I already have explained it to you earlier about the calculation. Kindly verify with the cc and accept them as collateral .

@nithin
Can you please look into this. Other brokers are accepting them as collateral.

[Nakul]

Hey @r95990 ,

This circular is evidence enough and as you’ve said - For Rs.100 cash collateral & non-cash collateral, the eligible value of bonds that can be pledged is Rs.10.

Zerodha will not maintain the cash margin component for the Bonds you pledge, certainly not to the extent of 90 to be eligible for benefit of 10. If there’s any change in policy, we’ll let you know.

[r95990]

@Nakul

Hey @r95990 ,

This circular is evidence enough and as you’ve said - For Rs.100 cash collateral & non-cash collateral, the eligible value of bonds that can be pledged is Rs.10.

Zerodha will not maintain the cash margin component for the Bonds you pledge, certainly not to the extent of 90 to be eligible for benefit of 10. If there’s any change in policy, we’ll let you know.

@Nakul @nithin

As per the circular and a practical experience in pledging them through another intermediary, ADDITIONAL CASH ASSETS @90% are not required to be maintained.
If an intermediary has maintained a 1000 cr worth of cash collateral and 1000 cr of non-cash collateral, then the intermediary is eligible for pledging 100 Cr. worth of Tax-free bonds (10 percent of the 1000cr Cash collateral) and since it is non-cash, we clients have to pledge 100 cr worth of cash collateral,

Kindly re-verify.

[viswaram]

@Nakul how does a GTT order work for pledged instruments?

I have say 1000 qty of 754GS2036 GOI bonds which are pledged, I have purchased them at say Rs103 per unit.

If i place a GTT order to sell at Rs104 the entire 1000qty - how will the unpledge work out?

Since its a T+2 settlement, is it expected that i get time to do the manual unpledge after the sell has been done?

[Chirag1]

Order will get rejected bcos of insufficient qty.

If you want to sell, first you should have clear balance of that much qty. ( unpledge and wait a day)

[viswaram]

system has not rejected the order yet - when do you think the rejection will take place ??

[ShubhS9]

@viswaram

how does a GTT order work for pledged instruments?

I have say 1000 qty of 754GS2036 GOI bonds which are pledged, I have purchased them at say Rs103 per unit.

If i place a GTT order to sell at Rs104 the entire 1000qty - how will the unpledge work out?

Since its a T+2 settlement, is it expected that i get time to do the manual unpledge after the sell has been done?

You need to unpledge the shares before pledging. The order will be rejected if you don’t have sufficient holdings once GTT is triggered.

@viswaram

system has not rejected the order yet - when do you think the rejection will take place ??

This will be rejected once GTT is triggered.

[viswaram]

@ShubhS9

This will be rejected once GTT is triggered.

since these are GOI bonds we dont get liquidity everyday. How can we capitalize the prices if the unpledging process is in its way?

What if i unpledge it and then the next day there is no buyers?

Dont you think you should enable instant unpledge for these scrips??

[Chirag1]

instant unpledge forget it. faster unpledge has been promised forever now. They were already working on it in 2019.

Pledged stocks unpledging and selling - General - Trading Q&A by Zerodha - All your queries on trading and markets answered (tradingqna.com)

[ShubhS9]

@viswaram

Dont you think you should enable instant unpledge for these scrips??

We’re working on instant unpledgging. Will keep you posted on it.

[viswaram]

yeah either the unpledge should be made instant or the provision to execute the GTT now and settle the sell order in T+1 should be enabled.

I lost out on the 92GS2030-GS opportunity 11 & 12th oct when there was liquidity. This is one scrip that hasnt traded with that kind of volume last 12 months.

[SachinSingh]

@Nakul, I’d initiated a pledge request for Parag Parikh flexi cap fund today, but didn’t receive any link for it. Is there some issue?

Ticket: #20221103366545

Update: Received the link 10 minutes back, and after multiple attempts, pledging was successful. Never received this late, so a bit strange. Even the Zerodha page says the cut off is 7 pm…

[Nakul]

There was an issue with the pledge process yesterday due to which there happened to be a short delay in setting up the pledge requests at CDSL. You would have received the notification from CDSL to approve the pledge within an hour from the time the pledge transaction was set up.