Margin Against Shares or pledging a stock is a loan towards shares in your demat account as margin money to trade in Futures and/or Intraday. If you have shares in your demat account, your money is locked till you sell the shares, you can pledge these stocks to get trading margins for F&O or Intraday trades.
When you request MAS, there are specific rules defined by each broker, so you have to check with your broker what scheme he is providing against MAS.
Key points to know are:
- The client must have a demat account with the broker.
- A haircut is the arbitrary reduction in the value of a security to calculate the risk cover. A % haircut will be applied, which calculate collateral margin over holdings. A haircut of 10% would mean that if you pledged stocks worth Rs 1 lakh, Rs 90,000 (90% of 1 lakh) will be added as a collateral margin to your trading account.
- Cash to collateral ratio is maintained at 50:50 which means 50% of the margin needs to compulsorily come in cash and the remaining 50% can be in terms of collateral margin.
- You can use this facility for equity Intraday and equity future and for writing Options of equities, indices, and currencies. You will not be able to use this margin to buy Options or take further positions on the equity segment.
- There can be a special charge by a broker to place a pledge and un-pledge request. This amount varies from broker to broker. Like Upstox charge Rs 50, Zerodha charge Rs 60.
- There are specific securities which can be pledged. You need to review the list of securities with your broker.
- A stock once pledged will stop showing up in holdings on the trading platform and you will not be able to sell it unless you unpledged. However, you are entitled for all corporate actions on your securities like bonus issue, stock split, dividend etc.
Margin Against Shares comparison
| Haircut | Pledge/Unpledge Cost |
Cash:Collateral - Ratio | Short Case (Not able to have 50% cash) |
pledge/Unpledge Request | Collateral margin request cutoff time |
Unpledge Request Cutoff time | Fund or Stock availability | |
|---|---|---|---|---|---|---|---|---|
| Upstox | By Script or 25% whichever is higher |
Rs 50 | 50:50 | Not allowed - Order Reject | By Email | 3:00 PM | 3:00 PM | T+1 |
| Zerodha | By Script | Rs 60 | 50:50 | Allowe order with 0.05% Intrest PD on debit amount. | By Email | 4:00 PM | 2:00 PM | T+1 |
| SAS Online | By Script or 25% whichever is higher |
Rs 99 | 25:75 | Not allowed - Order Reject | Online | 3:00 PM | 2:00 PM | T+1 |
| TSO | By Script | Rs 60 on Pledge only | 40:60(For Intraday) 50:50 (All others) |
Allowe order with 0.05% Intrest PD on debit amount. | Online | 4:00 PM | 2:00 PM | T+1 |
| MyValueTrade | By Script | Min 50 or .02% | Online | 4:00 PM | 2:00 PM | T+1 | ||
| ICICI Direct | By Script | 0.03 % or minimum of Rs. 50/- | Online | 4:00 PM | 2:00 PM | T+1 | ||
| Sharekhan | By Script | 0.02% or Rs.15/- per transaction whichever is higher | 4 times | Online | 4:00 PM | 2:00 PM | T+1 | |
| Kotak | By Script | 0.05% or Rs.30/- per transaction whichever is higher | 6 Times | Online | 4:00 PM | 2:00 PM | T+1 |
Conclusion
With MAS, you can use your long term investment as cash value for day to day trading of course with some limitations. Please read the complete brochure for more information and details of charges, cash vs collateral ratio and list of securities.
