Margin Against Shares in Demat Account – How it works? Published on Wednesday, February 18, 2015 by Chittorgarh. We can help forex margin call percentage find the right broker for your trading needs.
Margin against share is a loan against share an agreed interest rate offered by your stockbroker for trading purposes. It is a value-added service provided by the share broker. This service offers the client to use shares in their demat account to get the margin funding needed for trade. Very few stockbrokers in India offer this product as there is a higher risk associated with it. Brokers have the “Cash-Collateral proportion” which client has to maintain. The amount of margin made available is calculated by reducing ‘haircut’ from the current market price of the equity share. Mark to Market losses, customers need to have cash margin.
Fail to provide the cash margin leads to sell off the stocks he kept for margin to settle the obligation. Margin against share is the service provided by the broker to its customers who hold shares in their demat account for long-term investment and would like to use them as collateral for the loan. In simple words, if the customer is out-of-money in the trading account or needed immediate cash for trading, he could use shares and get margin needed for trading. The broker gives margin to its customers for the securities held by the client in their demat account. Visit brokers back-office website and go to your demat holding page. Click on Pledge Share button next to the share you would like to pledge. These shares are called Collateral Holdings or pledged holdings.
The broker deducts a certain percentage as a haircut for the price fluctuation of the holdings and allows the client trading limits for the balance amount. The client uses this margin for trading. Are there any additional charges for using margin against shares? Interest is charged at around 0. Pledging and unpledging the shares cost around 50 rs per script. Note that all the corporate action benefits like Dividend, Bonus, Rights Issue, etc shall accrue to the client and not to the broker since the client continues to be the end beneficiary of the shares.