Upstox lets you have a total MTF position size of up to ₹5 Crore. This means you can take positions worth up to ₹5 Cr via MTF, where Upstox funds upto 75% of the position size, and the rest is contributed by you.

Why is there a limit under MTF?

The ₹5 Crore position size limit under MTF exists primarily to reduce risk and protect both the broker and the trader.

• Risk Control for the Broker Brokers lend money to traders to buy securities under MTF. If traders take very large positions, the broker’s exposure increases, thereby increasing its risk. A fixed limit caps how much the broker is willing to lend, limiting their financial risk in case the market moves against the trader.

• Protecting the trader In MTF, the broker provides 75% of the funds required for MTF trade, which intensifies the profits and losses. Setting a limit helps prevent traders from taking large risks that could wipe out their capital or lead to margin calls when the value of their investments falls. It encourages individuals to trade responsibility with manageable risk.

• Regulatory Compliance SEBI mandates certain risk and margin norms. Brokerage firms like Upstox have to comply with these regulations. Having a position limit ensures brokers comply with these regulations, maintaining market stability.

• Liquidity and market stability When traders take large positions, it significantly impacts market liquidity and causes unnecessary volatility in the market. A limit keeps a trader’s exposure in check, maintains market stability and prevents excessive volatility.