Zerodha Launches Margin Trading Facility (MTF) on Kite

Zerodha Launches Margin Trading Facility (MTF) on Kite

Zerodha, India’s leading stockbroker, has officially introduced its highly anticipated Margin Trading Facility (MTF) on the Kite platform. This long-awaited feature enables investors to trade using leverage, a move driven by industry demand and the increasing value of derivatives contracts.

Here’s everything you need to know about Zerodha’s MTF:

What is MTF?

Margin Trading Facility (MTF) allows investors to buy stocks for delivery without having the entire purchase amount upfront. Zerodha provides leverage of up to 80% of the trade value for eligible stocks, charging an interest rate of 0.04% per day (₹40 per ₹1,00,000 per day) on the borrowed amount.

This facility makes it easier for investors to make high-value trades while managing their funds efficiently.

Key Features of Zerodha’s MTF

1. Eligibility:
   • Available for specific stocks listed by Zerodha.
   • Clients can access up to 5x leverage for certain trades.
2. Interest Rates:
   • 0.04% per day on the borrowed funds until the position is closed.
3. Limits:
   • Maximum funding per stock: ₹10,00,000.
   • Total funding limit: ₹50,00,000.
4. Holding Period:
   • MTF positions can be held indefinitely as long as the required margins are maintained.
5. Pledging System:
   • Investors must confirm pledges by 7 PM on the trade day.

How to Enable and Use MTF

1. Enabling MTF:
   • Clients must explicitly enable MTF on their account.
   • If Power of Attorney (PoA) or DDPI is enabled, activation is instant. Otherwise, it may take up to a day.
2. Placing Orders:
   • MTF orders can be placed directly through the Kite platform by selecting the MTF option in the order window.
3. Monitoring Holdings:
   • MTF holdings are marked with an “M” on Kite and can be filtered for easier tracking.
4. Daily Interest Tracking:
   • Interest charges and margin requirements are accessible via the Console MTF statement.

Costs and Charges

• Brokerage: ₹20 or 0.03% per order, whichever is lower.
• Pledge Charges: ₹30 + GST per ISIN.
• Square-Off Charges: ₹50 + GST per squared-off order.

Risks and Considerations

While MTF offers the opportunity for higher returns, it comes with inherent risks:

• Leverage Costs: Each day a leveraged position is held, it incurs additional interest, which can erode profits.
• Market Risks: If stock prices fall, investors may need to bring in additional margins or face liquidation.

Zerodha emphasizes caution, reminding users that MTF should be used responsibly and discourages speculative trading.

Why MTF Now?

With the rapid growth of MTF across the industry and increasing demand from clients, Zerodha recognized the need to offer this feature to remain competitive. The interest rate accounts for funding costs and risks associated with margin trading, ensuring fair and transparent terms for investors.

Final Thoughts

The launch of Zerodha’s MTF on Kite marks a significant addition to its suite of trading features, empowering investors with enhanced flexibility and purchasing power. However, it’s crucial for users to fully understand the associated risks and costs before opting for MTF.

For more details, visit Zerodha’s official platform or refer to their comprehensive terms and conditions.