383Views
What is pledge and what are different types of pledge?
Pledging shares means using your shares or holdings as collateral to secure an extra trading balance, allowing you to access additional funds for trading without selling your shares.
There are three types of pledges depending on the requirement:
<AH> 1. Margin Pledge:
</AH>
<AB> Pledge existing shares to obtain additional margin for trading without selling the holdings. Example: Rahul holds 100 shares of ABC Ltd in his Demat account. He pledges these shares to obtain additional margin for trading. By pledging, Rahul receives extra margin that can be used to take new positions in the market without selling his holdings.
Charges:
₹21+ GST per ISIN is charged for each pledge or unpledged request.
Example: Neha pledges share of two different companies, Infosys and Tata Motors. The charges will be:
</AH>
<AB> The Margin Trading Facility (MTF) is offered by brokers, allowing investors to leverage their capital by up to five times the share's value for investments. This enables you to buy stocks by paying only a fraction of the total price, while the broker funds the remaining amount. You are charged interest on the amount borrowed. You can invest in more than 1000 stocks with MTF Facility with Torus, view the Eligible Stock List Click here.
Example: Let’s say you have ₹5000 in your trading account, and the stock you wish to buy is priced at ₹5000 per share. If the stock qualifies for a 3x margin in MTF, you can buy up to 3 shares with your ₹5000. Here’s how it works:
Charges:
Pledge Charges:
The applicable charge is ₹21 + GST per scrip / ISIN regardless of the quantity purchased.
Example: Arjun buys 100 shares of ABC under MTF. Whether Arjun buys 100 or 300 shares in the same scrip / ISIN, the charge remains ₹21 + GST.
Unpledge Charges:
1. Squared off by Client: ₹21 + GST per scrip will be charged when selling or squaring off pledged MTF shares.
Example: Sunita sells / squares off 100 shares of ABC that were pledged under MTF. She will be charged ₹21 + GST for selling / squaring off the position, irrespective of the quantity.
2. Squared off by RMS: ₹21 + GST per scrip will be charged in such cases. Additionally, a charge of RMS Square off amounting to ₹50 + GST per order will be levied.
Example: Suresh buys 50 shares of ABC Bank but doesn’t clear the debit. Since the dues remain unpaid, the RMS squares off the position on or before T+5. Suresh will be charged ₹21 + GST per scrip and an additional ₹50 + GST per order for RMS Square off.
If the exchange delivers shares in two parts, pledge charges will be applied separately for each part (as explained in the pledge charges).
Similarly, while unpledging, the charges of ₹21 + GST will be applicable for each unpledged request. In the example explained earlier for pledge charges levied twice, unpledge charges will be levied for release / unpledging of each such part.
</AB> <AH> 3. T+5 CUSPA (Client Unpaid Securities Pledgee Account) Pledge:
</AH>
<AB> Shares are pledged to cover outstanding ledger debits if the payment is not cleared within the specified period. The Risk Management System (RMS) will square off the position if the debit is not cleared by T+5 Day. Example: Amit buys 150 shares of ABC but fails to clear the outstanding debit amount. These shares remain in CUSPA, and if Amit doesn’t clear the dues by T+5, the RMS will automatically square off the position to recover the outstanding amount.
Charges: Pledge:
₹21 + GST per scrip / ISIN will be charged when the shares are moved to CUSPA towards outstanding payment
Unpledge:
1) Shares sold by client: ₹21 + GST per scrip / ISIN will be charged.
Example: Meera sells 200 shares of ABC before T+5 without clearing the outstanding debit. She will be charged ₹21 + GST per scrip / ISN for the transaction apart from the brokerage towards the unpledge charges.
2) Shares sold by RMS: ₹21 + GST per scrip / ISIN will be charged.
Example: Meera has not cleared the outstanding charges by T+5. She will be charged ₹21 + GST per scrip / ISN for unpledging shares
Brokerage as per applicable slab ₹50 + GST towards RMS square off charges
</AB>
Related question :
Why are pledge charges levied twice for a single transaction?
There are three types of pledges depending on the requirement:
<AH> 1. Margin Pledge:
</AH>
<AB> Pledge existing shares to obtain additional margin for trading without selling the holdings. Example: Rahul holds 100 shares of ABC Ltd in his Demat account. He pledges these shares to obtain additional margin for trading. By pledging, Rahul receives extra margin that can be used to take new positions in the market without selling his holdings.
Charges:
₹21+ GST per ISIN is charged for each pledge or unpledged request.
Example: Neha pledges share of two different companies, Infosys and Tata Motors. The charges will be:
- ₹21 + GST for ABC
- ₹21 + GST for XYZ
- Total Charge: ₹42 + GST
</AH>
<AB> The Margin Trading Facility (MTF) is offered by brokers, allowing investors to leverage their capital by up to five times the share's value for investments. This enables you to buy stocks by paying only a fraction of the total price, while the broker funds the remaining amount. You are charged interest on the amount borrowed. You can invest in more than 1000 stocks with MTF Facility with Torus, view the Eligible Stock List Click here.
Example: Let’s say you have ₹5000 in your trading account, and the stock you wish to buy is priced at ₹5000 per share. If the stock qualifies for a 3x margin in MTF, you can buy up to 3 shares with your ₹5000. Here’s how it works:
- Total cost for 3 shares: ₹5000 × 3 = ₹15,000
- Your contribution (margin): ₹5000 (33.33%)
- Amount funded by the broker: ₹15,000 (total) - ₹5000 (your margin) = ₹10,000 (66.67%)
- Interest will be charged on the ₹10,000 funded by the broker at a rate of 0.05% per day.
Charges:
Pledge Charges:
The applicable charge is ₹21 + GST per scrip / ISIN regardless of the quantity purchased.
Example: Arjun buys 100 shares of ABC under MTF. Whether Arjun buys 100 or 300 shares in the same scrip / ISIN, the charge remains ₹21 + GST.
Unpledge Charges:
1. Squared off by Client: ₹21 + GST per scrip will be charged when selling or squaring off pledged MTF shares.
Example: Sunita sells / squares off 100 shares of ABC that were pledged under MTF. She will be charged ₹21 + GST for selling / squaring off the position, irrespective of the quantity.
2. Squared off by RMS: ₹21 + GST per scrip will be charged in such cases. Additionally, a charge of RMS Square off amounting to ₹50 + GST per order will be levied.
Example: Suresh buys 50 shares of ABC Bank but doesn’t clear the debit. Since the dues remain unpaid, the RMS squares off the position on or before T+5. Suresh will be charged ₹21 + GST per scrip and an additional ₹50 + GST per order for RMS Square off.
If the exchange delivers shares in two parts, pledge charges will be applied separately for each part (as explained in the pledge charges).
Similarly, while unpledging, the charges of ₹21 + GST will be applicable for each unpledged request. In the example explained earlier for pledge charges levied twice, unpledge charges will be levied for release / unpledging of each such part.
</AB> <AH> 3. T+5 CUSPA (Client Unpaid Securities Pledgee Account) Pledge:
</AH>
<AB> Shares are pledged to cover outstanding ledger debits if the payment is not cleared within the specified period. The Risk Management System (RMS) will square off the position if the debit is not cleared by T+5 Day. Example: Amit buys 150 shares of ABC but fails to clear the outstanding debit amount. These shares remain in CUSPA, and if Amit doesn’t clear the dues by T+5, the RMS will automatically square off the position to recover the outstanding amount.
Charges: Pledge:
₹21 + GST per scrip / ISIN will be charged when the shares are moved to CUSPA towards outstanding payment
Unpledge:
1) Shares sold by client: ₹21 + GST per scrip / ISIN will be charged.
Example: Meera sells 200 shares of ABC before T+5 without clearing the outstanding debit. She will be charged ₹21 + GST per scrip / ISN for the transaction apart from the brokerage towards the unpledge charges.
2) Shares sold by RMS: ₹21 + GST per scrip / ISIN will be charged.
Example: Meera has not cleared the outstanding charges by T+5. She will be charged ₹21 + GST per scrip / ISN for unpledging shares
Brokerage as per applicable slab ₹50 + GST towards RMS square off charges
</AB>
Related question :
Why are pledge charges levied twice for a single transaction?
Last updated: A Year Ago
383Views
Pledge And Margin
How do I pledge my shares?- How do I unpledge my shares?
- What are the charges for pledge and unpledge?
- How long does it take to receive limits after pledging?
- How can I check my pledged shares?
- Can I sell shares that are pledged?
- Why have I received less margin when I pledge my shares?
- What is the margin requirement to take an intraday position?
- What is Margin? And what are the types of margin?
- How is a margin statement helpful?
