MTF - Margin Trading Facility

What is Margin Trading Facility (MTF)?

When an investor or trader wants to buy more shares than the available money, the Margin Trading Facility (MTF) comes in. It's a service provided by Upstox where you can buy shares by paying only a part of the total amount as margin. Upstox pays the remaining amount at a nominal interest rate.

MTF trading enables investors to buy more shares by borrowing an amount from their broker as a loan, thereby increasing the potential risk and returns.

Example: ABC Ltd stock price is ₹100 per share, and you want to buy 100 shares. To take this position, you need ₹10,000 in your trading account.

But, you only have ₹2500 in your Upstox trading account. What to do now?

You opted for the Margin Trading Facility (MTF) and got a leverage of up to 4x in your available cash balance.

MTF trading is useful for traders and investors who wish to take bigger positions without using their own cash balance.

How Does MTF Trading Work?

MTF Trading works under the regulatory guidelines provided by the Securities Exchange Board of India (SEBI). Below is the step-by-step process to guide you through the working of MTF.

1. Choose Eligible Stocks: Identify the stocks that qualify for the MTF, based on exchange regulations and Upstox policies.

2. Pay Initial Margin: You pay a certain percentage of the total amount to purchase the shares as a margin.

3. Leverage from Broker: The remaining amount is funded by Upstox to complete the purchase of buying the stocks.

4. Shares Pledged: The shares bought remain in your demat account but are automatically pledged to Upstox as a security deposit for the MTF loan.

5. Interest Charged: Upstox charges a nominal interest daily on the funded amount until the full amount is repaid by the buyer.

6. Repay or Square Off: To stop the interest, you can repay the borrowed amount or sell the shares to square off the trade; it will automatically settle the loan.

Key Features of MTF

MTF is one of the highly leveraged products provided by the broker. Here are some key features of MTF:

1. Leverage: MTF allows you to increase your buying power by using borrowed funds from Upstox. It helps to take bigger positions in stocks with a smaller initial investment.

2. Interest: Upstox charges interest at the rate of ₹40 per day. (₹20 per day for the first slab of ₹40,000 + ₹20 per day for the second slab of ₹30,000).

3. Pledged Shares: Shares bought using MTF are pledged with Upstox as collateral. If the losses exceed the limit or the margins fall short, the broker has the authority to sell the pledged shares.

4. SEBI Regulated: MTF trading is fully regulated and operates under the guidelines provided by SEBI to protect investors. These regulations define margin requirements, disclosure norms and risk controls.

5. Time Limit: MTF positions are subject to the maximum holding period of 365 days. Within this period, if the stocks are not squared off or converted, the broker may close the positions after the limit expires.

Advantages of MTF

Below are the advantages of MTF trading:

1. High Buying Power: MTF increases the buying power by allowing investors to trade with the borrowed funds from the broker.

2. Increased Profit Potential: MTF is a leverage product, which amplifies the profit potential when trade goes in a favourable direction.

3. Flexibility: MTF works for various trading strategies, from short-term swing trades to long-term delivery trades.

4. Use of Pledge Margin: Investors can pledge their existing holdings to get additional funds, which can be used to place a trade with MTF.

5. Fully Online Process: Margin trading facility is integrated into your trading account, without any extra paperwork compared to loans.

How To Activate Your MTF Trading Account in Upstox?

You can use your existing Upstox trading and demat account to activate MTF in a few simple steps:

What is the MTF Pledge?

Under Margin Trading Facility (MTF), stocks purchased are pledged to the broker as collateral (security deposit). It is a mandatory process introduced by SEBI for using the MTF feature.

When buying shares under MTF, you have to pledge all the shares you want to buy to continue to hold the position. This has to compulsorily be done before 9 PM on the same day as availing it. In the case you fail to authorise your pledge, the shares are squared off on the T + 7 day.

To pledge, avail and sign the agreement through your trading account. An email / SMS confirmation will be sent to you along with a link that will redirect you to the CDSL website.

Enter your PAN / Demat account details here and select the stocks you want to pledge. An OTP will be sent to you, which will help you complete the process.

Steps to Avail the MTF in Upstox

To avail this facility, here are some easy steps:

Step 1: Log in to your Upstox account.

Step 2: Select the stock that you want to purchase.

Step 3: Enter the quantity, select product type as margin and click confirm buy.

Step 4: Authorise your MTF pledge request by 9 PM on the same day.

Step 5: Once it is approved, check your email / SMS for all communication.

Step 6: Click on the CDSL link you receive and enter your PAN / Demat account details, and that's it. An OTP will be sent to you to complete the process.

MTF Charges in Upstox

Repayment Terms