This is the mstock page for F&O pledge
Margin Pledge: What is Margin Pledge & its Meaning | Mirae Asset .
They are saying that for pledging shares, they are going to charge interest ! Never heard any other broker charging interest for margin against collateral for F&O trading!!
Have anybody heard anything like that? Is it legal ?
They charge 0 Brokerage, they need to make money from somewhere i guess.
Otherwise, they don’t have to provide capital for pledging, so no reason for interest and brokerage will compensate for any additional risk.
This kind of think becomes a big issue with intraday trading, esp due to quarterly settlement. Getting all capital back every 3 months is just too much, and sending back will become impossible due to bank limits.
Your returns reduce too, intraday returns are anyway reducing these days. So more incentive to shift from trading to long term / positional / ASBA. For anyone with decent capital, best to change broker.
are they accepting 100% non cash component and allocating their own cash/cash component to cover 50% cash component requirement for your trade? if so then charging interest on that 50% is fair.
if you are pledging 50% non cash and 50% cash component then you satisfied exchange requirement, broker is not giving anything from their pocket. if they charging interest on this situation then it should be illegal, because they are charging interest on your own property.
Broker’s main revenue source now a days in not brokerage, but float interest income. Just look at zerodha collateral to CC and you will find that they have given FDR instead of your cash. That is okay, someone will earn from cash and they should. MStock also earns the same.
Most brokers (unlike zerodha) don’t even tell people that 50% cash required can also be interest bearing security and ask for real cash. MStock didn’t even allow pledging till now for getting interest income even from margin money! MTF income is separate.
I am perfectly fine with brokers earning income as long as they are not cheating. They should call 9.99% fee for haircut, instead of interest. Interest charge is plain cheating.
for 50% non-cash portion, they are asking for interest on pledged shares. 50% cash they are asking separately. The balls they have got to be so brazen in illegality!!
If They asked for interest for 50% only for cash portion, it was understandable. However, I don’t think that is allowed by SEBI yet.
Are there any brokers which extend collateral for equity or F&O delivery against pledges, without interest rates?
Why would anyone give you money interest free?
Most discount brokers don’t charge any interest on collateral margin you received against your pledged shares /securities - that includes both cash and non-cash component - I have seen some traditional brokers still charge interest on that - (as if they are giving you margin but in fact exchange is giving this collateral margin - to increase participation)
Can that collatoral be used for overnight trades?
Many people confuse between margin and cash. Margin is ALWAYS given by client, not brokers. Depending upon context, client gives margin in the form of Cash, FD, BG, Mutual Fund, Equity etc. Sebi stipulates rules of calculating margin received by broker from client. Basically SEBI has clear rules about haircut for all margins and for cash,FD, BG it is termed as 0% .
Broker is NOT extending to client anything. Only in case of MTF, brokers give funding (Cash) on interest against margin given by client as stipulated by SEBI.
Other than that there is no funding by brokers anywhere, so no interest.
I would like to know name of some brokers who ask for interest even for receiving margin from client!!
So for e g. if you have 5L worth of stocks in MStocks and they have a 20% haircut and you pledge these to get 4L non cash margin to trade then on this 4L you are being asked to pay interest?
Yes.
Just found a that there are other brokers too. HDFC SKY is also charging “interest” 12% for margin against stock pledge for shares.
https://hdfcsky.com/pricing#margins
When will SEBI stop daylight robbery like this ?
If multiple big brokers are doing it then it might means they can do it, I don’t think they’ll break Sebi rules so openly…
Actually, this is legal gray area. There are many crimes, whose laws were created after crimes were discovered. SEBI was toothless during Harshad Mehta scam, insider trading was allowed. Many laws changes as a response to many scams after that.
So, probably someone should complaint to SEBI about this malpractice. Maybe, they would bring circular??
We are talking about F&O contract margin, not shares delivery.
Don’t know about other brokers but Fyers has not charged for cash component.
MStock is THE WORST brokerage I have come across. Their margin is absolutely worst and makes no sense and the pre-pledge facility absolutely ensures that you lose out on the best trades.
MStock is the cheapest because they bring nothing to the table. Avoid.