What are the advantages of Margin Trading Funding (MTF)?


There are several advantages of trading using the MTF facility: 
  •  Margin trading with Geojit gives you access to funds and allows you to get up to 3.33 times margin/ leverage
For example, Mr Thomas wants to buy 1000 shares of Tata Motors at Rs. 500 per share. Let us look at how he can take a position with and without MTF:


Particulars Without MTFWith MTF-1With MTF-2
Cash MarginsRs. 1,50,000Rs. 1,50,000-
Pledged Collateral--Rs. 3,00,000
MTF Loan-Rs. 3,50,000Rs. 5,00,000
Total InvestmentRs. 1,50,000Rs. 5,00,000Rs. 5,00,000
No. of Shares Purchased30010001000


  • It provides access to low-cost funding. Interest is not charged till the settlement day (T+1) of the purchase. After the settlement day, interest charges are applicable @ 0.0275% per day for 4 calendar days and @ 0.05% per day thereafter.

  • It allows you to maximise your ROI (Return on Investment). 

For example, Mr Thomas sees an opportunity to buy 1000 shares of Tata Motors at Rs. 500 per share as he expects its price to go to Rs. 600 over the next month. Let us look at how he can take a position with and without MTF:


Particulars
Without MTFWith MTF-1With MTF-2
Cash Margins     
Rs. 1,50,000
Rs. 1,50,000
Rs. 75,000
Pledge Margins
--Rs. 75,000
MTF Loan
-Rs. 3,50,000
Rs. 4,25,000
Total Investment
Rs. 1,50,000 Rs. 5,00,000
Rs. 75,000
Tata Motors Price- Dec 1st (BUY) 
Rs. 500 per share
Rs. 500 per share
Rs. 500 per share
No. of Shares Purchased
300
10001000
Tata Motors Price- Dec 31st (SELL)
Rs. 600 per share
Rs. 600 per share 
Rs. 600 per share
Total Profit 
Rs. 30,000 
Rs. 1,00,000
Rs. 1,00,000
Interest on MTF Loan @ 18%
-Rs. 4,584
Rs. 5,566
Net ProfitRs. 30,000 
Rs.  95,416
Rs. 94,434
ROI20%
63.6%
125%


  • It is ideal for investors to take advantage of short-term fluctuations in the market.

  • The MTF facility is regulated and monitored by SEBI (Securities Exchange Board of India). 

  • Investors are eligible to receive all corporate action benefits, as shares pledged under the MTF facility continue to remain in their demat accounts. 

  • Unlike regular trading accounts, MTF trades will not cause your account to be blocked due to a 7-day debit. If blocked, customer will be permitted to take MTF position, but he will have to mandatorily pledge the MTF shares before settlement. 

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