Hi, i have ETFs pledged under dhan, and already got margin against that, can i use that margin to buy stocks in MTF and hold them.
@kkbatra The margin you got against ETFs can be used to enter the trade. However, when the settlement happens you need to pay for your securities in CASH. The same rule applies for MTF trades as well, except for the fact the partial funding in MTF is done by Dhan.
Understand this way - You have ETFs worth 10k (post haircut). We call this as Collateral.
To buy any stock, you need to have a margin of around 25% - This could be in CASH or Collateral.
Stock ABC is trading at Rs. 1000
You place an order to buy 40 shares.
First Check: Does client have sufficient margin?
(40 x 1,000 = 40,000). Margin available is 10,000. Hence, trade is allowed.
Now on the day of settlement, you need to pay the trade value in CASH and thus your trade will be complete.
Under MTF for the same order, you would need to pay 10k in CASH and 30k we will fund you (again in CASH)
Hope this helps you to understand how is collateral different from CASH.
Hi, in case of Investment order, if on the settlement day the systems finds insufficient cash in my wallet, how is it dealt with? thanks
@Naresh_Mungilwar If your wallet (ledger) shows a negative balance on the settlement day, shares equivalent to the debit amount, along with an additional buffer, will be automatically pledged for CUSPA. Additionally, DP charges of Rs. 12.5 plus GST will be applied.
Dear Shrimohan, Iam buying under investment tab & not trading. In that case the system should not allow to buy if there is no enough balance in the ledger, though I have pledge margin. please advise.
@Naresh_Mungilwar To purchase any stock for investment, you typically need to provide a margin of around 100%, which can be in the form of either cash or collateral.
For example, if Stock ABC is trading at ₹100 and you place an order to buy 100 shares, the system will first verify whether you have sufficient margin, i.e., ₹100 x 100 = ₹10,000. Suppose you have ₹4,000 in cash and ₹6,000 as a pledge margin. Since this amounts to the required ₹10,000, your order will be successfully placed.
However, on the settlement day, the trade value must be paid in cash. Since you only have ₹4,000 in cash, you will pay that amount, and we will cover the remaining ₹6,000 on your behalf. Because we are covering ₹6,000, the shares equivalent to that value (plus a buffer) will be marked under CUSPA.
Note that while the pledge margin can be used to place a trade, it cannot be used for the settlement.
you said pledge margin can be used to place a trade, but Iam not placing a trade, but rather using the “investing” tab on the Buy-page. In that case the system should not allow to invest with no cash in ledger. Nevertheless, how much time(from the point of order execution) I get, to provide cash to fulfil margin based order, before the CUSPA action taken by Dhan?