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We observe that many times, clients do an MTF trade but forget or miss to complete the process by pledging the stocks bought under MTF to have them delivered in as Funded stocks. This will have two negative impacts
1) You will not be able to carry the stocks beyond Trade + 7 working days as the trades are not classified as MTF. To classify a trade as MTF you need to pledge the stocks bought on the same day
2) Such trades will be allocated to NSE Cash Segment and margin coverage issues will arise if there are no sufficient funds in it.
As you are aware, if there is no sufficient margin coverage as against the debit in the CM segment, we, as per our internal policy, will square off the stocks which were bought in MTF but not allocated to it due to the non-pledging of stocks, on the day the credit coverage issue arises. To explain with an illustration, let us assume that you have bought 500 Infosys in MTF on 15th March 2021. As a process, you will be required to pre pledge the stocks by 15th March EOD. If this is not done, the MTF trades will be allocated to the NSE CM segment and 500 Infosys will be squared off on 18th March 2021 if sufficient funds are not available in the NSE CM segment. This is an existing practice and we encourage you to pledge all stocks bought under MTF on the same day to avoid squaring off positions that you created with an intention to hold for a long time.
We have also increased the Margin requirement in MTF from the current 45% (on Group I F&O stocks) to 50%. This is to make the MTF margin requirement at par with our NRML margin requirement which again is 50%. This will help you to clearly distinguish between stocks that you want to hold for a long period and stocks which can be sold in a short span. You may use the MTF option only to buy stocks for the long term and this will expand your space to add more stocks as and when you find an opportunity in the MTF segment. To know more about MTF margin read our FAQ here.
In case of any queries, do mail us at [email protected], we will be glad to answer you.