MTF Limits and Liquidation Policy

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The MTF (Margin Trade Funding) product accepts and allows only Group 1 securities further approved by PLPL – PLPL Approved Group 1. The margin on purchases of such stocks is as defined below:

Category of stockApplicable Margin
Group 1 stocks available for trading in the F&O segmentVAR+3 times of applicable ELM
Group 1 stocks other than F& O stocksVAR+ 5 times of applicable ELM

*Applicable VAR & ELM shall be as in the cash segment for a particular stock.

For e.g.: Client gives 100 shares of reliance as collateral in NSE MTF and buys 20 TCS & 100 shares of PGEL.The margin requirement is as under:

Collateral 100 shares Reliance @ 1600   1, 60,000

Haircut: VAR+ELM (7.5 +5)                          20,000

Initial Margin Available                              1,40,000

Scrip-wise Applicable margin

Scrip Name                       VAR                     ELM                                   Total

TCS                                   7.5                       5*3=15                              22.50                   FO stock

PGEL                                  17.91                   5.89*5=29.45                   47.36                  Non Stock

Calculations:

Initial margin                                                1,40,000

Less:Buy Margin

50 TCS @ 2482=1,24,100                            27,922.50 (124100*22.50%)      

300 PGEL @ 350=1,05,000                         49,728.00 (105000*47.36%)      

Total Available Margin                               62,349.50

What does MTF Collateral Stocks mean?

  • PL approved stocks of MTF will be allowed to be pledged towards MTF Collateral
  • Shares which are accepted for Pledge for MTF will be available as margin from next trading day

Advance Pledge on MTF Funding Stocks:

  • Advance MTF Pledge instruction will be initiated on Purchase of Stock under MTF on Trade date and validity of the Pledge instruction will be till T+2 days
  • Client has to accept the Pledge request before T+2 days
  • Shares are transferred to clients Demat account on T+2 day (Settlement day) and the same will be pledged to MTF funding Pledge account upon acceptance of Pledge.
  • If Client doesn’t accept the advance Pledge instruction then on T+3 day position will be liquidated from RMS to the extent of debit.

MTF Collateral and Funding Pledged stock details can be seen at Pl clients Menu -> Holding -> Client Pledge Holdings Here details are available under heading Funding stocks and MTF collaterals separately.

How is Client-level Stock Concentration actioned

The following Stocks shall be exempted from stock concentration at client-level:

  • Stocks deposited by client as Collateral
  • Derivative listed stocks.
  • Funded Stocks of Clients with Margin Trading finance less than Rs.5 lakhs

What happens if there is a Failure to Meet Margin Calls by client:

The following actions may be anticipated by client in the event of a failure to meet the margin calls:

  • Maintenance Margin Call: PL may, at its discretion, liquidate funded/Collateral stocks to maintain the desired Maintenance Margin levels.
  • MTM Margin Call: PL may, at it’s discretion, liquidate whole or part of funded/Collateral stocks to recover the ledger debit plus accrued interest under the Margin Trading facility & maintain the 80% level. Such liquidation shall be effected any time not later than 5 trading days from the trading day succeeding the date of margin call.

  • When can Liquidation happen without prior notice to client:

If the Loan to value exceeds 90%, the PL may, at it’s discretion, liquidate the partial funded/Collateral stocks to maintain 80% LTV without any notice to client to recover the ledger debit plus accrued interest under the Margin Trading facility.

If no trade transactions are executed under MT-NSE for more than 90 days, funded stocks and/or collateral stocks may be liquidated at the discretion of PL to clear the debit balance.

In case of any unrecovered debit in MTF ledger after the liquidation the same shall be recovered by selling of stocks available in the client’s normal trading account or the client making payment.

What actions are taken for excessive stock concentration

  • Concentration in a stock shall be measured at EOD by arriving the percentage value of single funded stock against Total Stocks (funded plus collateral).
  • EOD alerts to be generated for stock concentrations above 40%.
  • If Stock concentration exceeds 50%, no further exposure be allowed in such stock to MTF clients till the related concentration drops to 40% as per EOD calculations.
  • EOD alerts where Holding Quantity of single funded stock exceeds 20% of the average daily traded volume. For this purpose, the traded volume in the last 10 trading days at the relevant Exchange shall be considered.
  • Where the Holding Quantity of single funded stock exceeds 25% of the average daily traded volume, no further exposure in such stock be allowed to MTF client till the relevant holding quantity drops to 20% as per EOD calculations.

Note: Stock financed under Margin Trading at NSE can be sold only through Margin Trading at NSE

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