Margin Trading Funding (MTF)

Margin Trading Funding (MTF) is a facility offered by stockbrokers that allows investors to buy stocks by paying only a part of the total trade value. The remaining amount is funded (loaned) by the broker, with the stocks bought kept as collateral until repayment.

In simple words: It’s like borrowing money from your broker to buy more shares than you could with just your own funds.

Example:

1. You have ₹50,000 in your trading account.
2. You want to buy shares worth ₹1,50,000.
3. Using MTF, you invest ₹50,000 (your margin) and the broker funds ₹1,00,000.
4. The shares you buy are pledged as collateral to the broker.
5. You pay interest (daily/weekly/monthly) on the funded amount until you repay or sell the shares.

Key Features

• Leverage – Enables buying higher value shares with limited own capital.
• Collateral – Shares purchased are pledged with the broker.
• Interest Charges – Brokers charge an interest rate (varies by broker, usually 9%–18% p.a.) on the funded amount.
• SEBI Regulations – MTF facility is regulated by SEBI under SEBI Margin Trading Guidelines, 2018.
• Eligible Securities – Not all stocks are allowed; brokers provide a list of approved securities for MTF.

Read More - Margin requirements in India Stock Market

Charges for Using MTF (Zerodha)

• Interest: 0.04% per day (₹40 per lakh) on the borrowed amount. Interest starts from T+1 day and continues until you sell the stocks.
• Brokerage: ₹20 or 0.3% per order (whichever is lower). Applies to both intraday and delivery MTF trades.
• Square-off charges: ₹50 + GST if Zerodha closes your position.
• Pledge & Unpledge charges: When you buy stocks using MTF, they are pledged automatically. When you sell, they are unpledged automatically and the cost: ₹15 + GST per ISIN (per stock) per day.