MTF(Margin Trading Facility)

@tanwarrht Looks like it.

But I am sure Zerodha will also introduce unlimited holding period.

1 Like

Please bring taking delivery of those stock also when we have ready to paid full amount

Can check this.

3 Likes

Hi @siva & @nithin,

This is My First Post and I am writing thinking that it would be read and considered . It is detailed but worth reading. have been using MTF in many platforms and explored quiet a few below are my genuine wishlist/feedback which can be added in Zerodha to make it the best platform in the industry.

Feature Wishlist

  1. Option to add more cash to the particular MTF Stock Purchase to reduce interest - I have seen this option on ICICI Direct where you can add cash later on for that particular stock purchase. Currently in many other brokers we can not do that.
  2. Pre Pledging of MTF Stocks - It is currently available in mStock, I have not seen this option with other Brokers.
  3. Trigger Price Dsiplay for every stock - There should be a way to see the trigger price of every stock so that people know at what price the MTF stock would be squared off, People can use option 1 to decrease the trigger price. ( This is available with ICICI Direct)
  4. Unlimited Holding Period of MTF Stocks - Currently many brokers have less than 1 year holding, mStock provides more unlimited period holding time for MTF Stocks. This helps investors in saving the short term capital gains tax as they can keep holding.
  5. MTF Calculator - I saw only calculator on dhan website for MTF. It is important to plan your investment otherwise people donā€™t consider many exchange charges. I hope Zerodha would make a calculator in which person can edit a) Interest rate b) holding days c) Entry Price d) Exit Price. MTF Calculator - Calculate Interest, MTF Charges & Margin Available | Dhan
  6. Margin Freeze for that investment- As MTF margin requirement for the exchange changes on daily basis for every MTF stock, many broker change the margin requirements for your holdings on a daily basis. In Kotak this margin is fixed at the purchace date and does not change afterwards. If you make a fresh purchase in this stock then the new margin would be applied.
  7. Same stock different position display- This option is available in ICICI direct where if you make another MTF purchase in the same stock then the trigger price, Margin used etc are displayed as a different holdings this helps to add a margin for that particular purchase as discussed in option 1.
    8. Low interest Rates- Franky speaking 18.25% (.05 * 365) would a BIG failure for Zerodha and it wont attract any new customers. ICICI provides 9.67%. So may be Zerodha should revise their charges . Margin Trading Funding - MTF Facility by ICICI Direct

I would request other members to add the MTF features that they love.

Lets make Zerodha a best MTF solution providing platform.

2 Likes

Thanks for your feedback, I am adding my colleague @VenuMadhav who leads the MTF also to let aware of your feedback. Also we will be charging only .04% per day and not .05% as you mentioned and definitely you canā€™t compare us with bank rates.

MTF could have been 12.5% p.a.

If you have enough cash, you can convert your MTF position into a delivery position.

Requirement for the client to enter OTP to pledge is going away effective October 14, 2024. Refer circular

image

We will take this feedback

We donā€™t intend to square off positions unless thereā€™s margin shortfall or a complex corporate action (de-merger etc). FYI, most brokers tend to close positions for splits and bonuses too.

hmm, weā€™ll take this as feedback

Same, margin is charged basis what was applicable on the day of trade. However, if the stock price falls that triggers an MTM call, and if the client isnā€™t able to fulfill, the positions will be squared off.

Weā€™re charging 0.04% day.

1 Like

Canā€™t this be set to 12.5% by any chance? Zerodha already has a great NBFC and the cost of funds for Zerodha Capital is lower than most other NBFCs. I am just asking if this is the final rate that the management team has decided to go for? @VenuMadhav If you could throw some light on this, Iā€™ll be glad. Thanks.

@VenuMadhav you are largest - you can reduced the intrest rate to 12 % like that - if you increase then no point to have this facility - any lose for clients they need to bear both - but you dont have any loss

please look at the client level also - without client their is no broker

Thanks for your feedback. One can have endless debates about how much one should charge, even in the above threads, thereā€™s request for 12.5, 12 :slight_smile: If it was 12.5, questions would be why canā€™t it be 11.5, in line with what our NBFC charges as rate of interest for loans availed. The comparisons can be endless.

We believe what weā€™re charging is fair, and reflects the value of the service we provide.

4 Likes

To add to what @VenuMadhav said, it is charging enough to cover the overnight risk. With LAS (Loan against security), the haircut is 50%; that is, you can borrow only 50k for pledging stock worth 1lk. The risk is lower, and hence, we charge around 11.5%. In the case of MTF, you can trade something worth Rs 1lk with as low as Rs 20k in your account. The risk for us is much higher hence we charge ~15.7% (0.04% compounded daily).

12 Likes

Appreciate your detailed replies and clarification. Thanks! :slight_smile:

Soon traders will demand zero interest under Pradhaan Mantri MTF yojna

10 Likes

Thanks @VenuMadhav for quick response. Converting to delivery is an option but I am suggesting an option to reduce the trigger price of the stock by adding some amount to that particular trade. This option is generally used by the investors, where they donā€™t want to convert to delivery but donā€™t want their holding to be squared off because of a sudden down move and investor expects the stock to move up in few days.

I am attaching a snapshot of ICICI direct open position for your reference. Observe that

  1. Same stock purchased on different dates is treated as a different transaction and have different trigger prices.
  2. There is option to add margin thereby reducing the borrowed money from the broker and thereby reducing the trigger price. ( This is the option that I was suggesting)
  3. There is also option to convert to delivery.

This way every transaction can be managed individually and hence reduce the MTM calls from the broker as people can manage it otherwise one has to manage it on the portfolio level.

Pardon me if I have quoted in a wrong way , I am new to the platform.

Weā€™ve built our system the same way.

Ok, I now understand what youā€™re asking. You want the ability to partially pay for the MTF purchase, thereby reducing the funded value. This is not something weā€™ve accommodated for in the current system. We will have to build a system that allows users to voluntarily apportion a portion of their free funds towards MTF segment to cover for a part of the funded amount. I donā€™t know if thereā€™s a real world use case for this. We will evaluate and see if this needs to be provided.

@VenuMadhav Yes, this is a real world use-case. I have built my entire portfolio this way, all thanks to ICICIdirect. I have now been doing this for 5+ years.

Not everything is black and white because investors want full control over their funds utilisation so there is a lot of room for customisation.

Lets say I had a big day today (trading) and I want to reduce my funds borrowed in my long term portfolio. How do I do that in Zerodha? Then of course, I will need a part payment flexible option.

4 Likes

Thank you for your response. But there is a use case which is to manage the market volatility and avoiding MTM calls. Also we should consider investors who want to have a full control of every purchase under MTF not just the whole MTF combined as basket.

With Zerodha now people have expectations that itā€™s system would be better than others and I am afraid we are behind other existing brokers in case of MTF.

1 Like

I also understand that this is something which Zerodha can not implement immediately but whenever you evaluate this please consider reverse as well i.e when the Stock went down I added extra cash to the particular MTF transaction to avoid Square-off now when the stock came up I should be able to withdraw the cash added thereby again increasing the funded value by broker and increasing the trigger value at which the the stock would be squared-off. This helps in freeing up the cash for other purchases.

This is not present with any of the brokers and Zerodha can be the first one to introduce this feature.

1 Like

It would be good if we can have some educational blogs,videos,playlist on this topic for new traders, before rolling out the featuresā€¦

1 Like

Funny to see you asking for 12.5 % on another thread and asking me to chose a different broker for the same comment . Be happy with 15.7 % now !