Stock market traders and investors often look for ways to amplify their returns, and one such strategy is MTF trading. Margin Trading Facility allows traders to buy more stocks than they can afford by borrowing funds from their broker, using their existing holdings as collateral. This enables investors to take larger positions in the market while leveraging their available capital.
However, margin trading funding comes with risks, and understanding what margin is, the MTF interest rate, and what margin requirements work is essential. In this blog, we will explore what is MTF in share market, how it operates, and the key factors to consider before opting for margin funding.
MTF trading is a service that allows traders to buy stocks using borrowed money from their broker instead of paying the full price upfront. This means that traders can take larger positions and increase their market exposure.
For example, if an investor wants to buy shares worth ₹1,00,000 but only has ₹50,000, they can use Margin Trading Facility to borrow the remaining ₹50,000 from their broker. In return, the broker charges an MTF interest rate on the borrowed funds.
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Not all stocks qualify for margin trading. Exchanges like NSE and BSE determine the list of stocks on margin that brokers can offer under Margin Trading Facility.
The broker provides funding for a percentage of the trade value while the investor deposits the remaining amount (what is margin money).
Investors need to maintain a margin requirement, which acts as collateral against the borrowed funds.
The MTF interest rate is applicable until the investor repays the borrowed amount.
Margin refers to the money investors deposit with their broker to buy stocks using leverage. It acts as collateral to cover potential losses and ensures that the broker can recover funds in case the trade goes against the investor.
Margin money is the investor’s capital contribution to the trade. It is different from margin trading funding, which is the amount borrowed from the broker.
For example, if an investor buys shares worth ₹1,00,000 with 50% margin funding:
MTF in share market is a facility that allows investors to buy stocks without paying the full amount upfront. It is different from normal stock buying, where investors pay the entire amount at the time of purchase.
However, MTF trading comes with risks, such as margin calls, forced liquidation, and interest costs.
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Margin requirement refers to the minimum amount of capital that investors must maintain to keep their Margin Trading Facility positions open. It is usually expressed as a percentage of the trade value.
If the investor’s margin falls below the maintenance level, the broker may issue a margin call, requiring them to deposit more funds or sell some holdings.
An MTF calculator helps traders determine the amount they can borrow, their required margin, and the interest costs associated with margin trading funding.
For example, if an investor borrows ₹50,000 at a 12% MTF interest rate for one month, the interest payable would be ₹500.
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Since MTF is a loan facility, brokers charge an MTF interest rate on the borrowed funds. This rate varies across brokers and typically ranges between 9% and 18% per annum.
It is crucial to calculate the total interest cost before opting for margin trading funding to avoid unexpected expenses.
While margin trading funding allows investors to buy stocks with borrowed money, option selling margin applies to derivatives trading.
| Feature | MTF Trading | Option Selling Margin |
| Purpose | Buying stocks on margin | Selling options contracts |
| Margin Requirement | Lower (25% to 50%) | Higher ( as an option carries unlimited risk) |
| Interest Costs | Interest charged on borrowed funds | No interest, but requires higher capital |
| Risk Level | Medium | High |
Traders should understand these differences before deciding between MTF trading and option selling margin.
Not all stocks qualify for the Margin Trading Facility. Stock exchanges determine stocks on margin eligibility based on:
Before using MTF trading, investors should check with their broker for the list of stocks on margin.
MTF trading empowers investors to enhance their market exposure using margin trading funding, but it requires careful risk management. Understanding what margin, MTF interest rate, and margin requirement is crucial to avoid forced liquidation.
At Jainam Broking Ltd., we offer expert guidance, seamless margin funding solutions, and competitive interest rates to help traders make informed decisions. Whether you’re a beginner or an experienced investor, our tailored insights ensure smarter MTF trading strategies.
So, are you planning on trading in the Margin Trading Facility? If yes, you are at the right place!
Open a Demat Account with Jainam Broking Ltd. Now!
Written by Jainam Admin
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Margin is the amount a trader deposits with a broker to buy securities using borrowed funds. It allows traders to take larger positions than their actual capital.
MTF (Margin Trading Facility) is a service that enables investors to buy more stocks than they can afford by borrowing funds from their broker, using existing holdings as collateral.
An MTF calculator helps traders estimate the amount they can borrow, the required margin money, and the interest cost based on the MTF interest rate.
Margin requirement is the minimum balance that a trader must maintain in their trading account to continue holding an MTF position. If the balance falls below this level, a margin call may be issued.
Margin money is the portion of the trade amount that a trader funds using their capital, while the broker funds the rest through margin trading funding.
MTF interest rate is the cost charged by brokers for lending money under margin funding. It varies across brokers and is calculated on the borrowed amount over a specified period.
Not all stocks qualify for MTF. Only stocks on margin, as determined by stock exchanges like NSE and BSE, can be traded under margin funding.
Option selling margin refers to the capital required to sell option contracts, which is generally higher due to unlimited risk potential, whereas margin trading funding allows investors to buy stocks on borrowed capital with a lower margin requirement.
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