Requirement for 50:50 Cash & Collateral

@nithin @siva @VM1 Zerodha requires 50% of the margin on overnight F&O positions to compulsorily come in the form of cash (or equivalents) and the balance 50% can be in the form of collateral (pledged stocks and ETFs). In one of my Zerodha accounts, I was charged a penalty for not maintaining 50% in cash although my overall margin was adequate.

A lot of other brokers do not insist on this 50% rule. In other words, they allow the whole margin to come by way of collateral in the form of pledged stocks and ETFs.

Can someone throw light on these differing practices used by different brokers? Is this 50:50 rule mandated by SEBI or by the exchanges? Or is this Zerodha’s policy alone?

This is an Exchange requirement, not Zerodha’s. Here’s the link
Search for ‘Effective Deposits’ on the above page: At least 50% of the Effective Deposits should be in the form of cash.

I wouldn’t be able to comment on policies of other brokers, they could be blocking their own cash margins to allow you to take positions.

As I said earlier, its not our policy, its the Exchange’s policy.

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Is there any max limit on amount which can be given after share pledging

Depends on how much one is pledging after haircut.

You can refer to this sheet to ascertain the approximate margins you’ll get.

@VM1 one more thing if i write options with this collateral and close position s intraday then the 50% cash requirement would not be needed

Still required to bring 50%. For pure cash component, first buy liquid fund in the debt Mf segment and pledge it to Zerodha . 10% haircut and 90% will be available as per pure cash for intraday equity, futures both buy and sell intraday or Normal/overnite and Option Sell both intraday and Normal/overnite.

Of course, equity shares deliveries and option buy not possible thru these trading margin funds obtained through pledging.

Currently 6 leading liquid MF are permitted like HDFC liquid fund, Aditya birla, ICICI, Reliance/Nippon, Franklin and Axis. Direct Plan and growth scheme of these funds may be bought and pledged. LiquidBees can also be bought and pledged but liquid funds will give better returns at say 7% which belongs to you despite pledging.

Can someone confirm that imtraday option selling also zeridha require 50%cash in addition to the pledged funds after haircut .?