I noticed that the Margin Trading Facility (MTF) leverage on Nippon India Silver ETF (SILVERBEES) has recently been reduced to 1x (effectively no leverage). Earlier, higher leverage was available on this ETF, which made it attractive for trading and positional strategies.
Does anyone know:
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Why the broker/exchange has reduced SILVERBEES MTF leverage to 1x?
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Whether this is a temporary risk-control measure or a permanent change?
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If temporary, is there any indication of when the leverage might be reverted to the previous levels?
Would appreciate inputs from anyone who has heard from their broker or seen any official circular/communication about this.
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Hi @VithalPatil Welcome to MadeForTrade community.
Well exposure and volatility are two most important factors that makes exchanges and brokers add or reduce the leverage provided on a security, of course trading platforms can’t provide leverage over the exchange norms.
When it comes to SILVERBEES, I assume you are aware of the volatility and hence the action. Infact, you can track this on ScanX - SILVERBEES moved to be the highest leverage by MTF with exposure as of the day at INR 1700 Crores. Track it here - MTF Insight - Track Margin Trading Facility Data & Trends | ScanX
There are many side effects of MTF that remain masked during a bull market. When an asset in your holdings crashes, you not only take the price hit but also continue paying interest on the borrowed amount. Adding to this risk, brokers or exchanges can reduce leverage at their discretion, forcing you to infuse additional capital, often far more than what you had originally planned.
While the bull run has poured fuel on the MTF fire, when the market turns, it won’t be fun for the entire ecosystem.
This is why I always recommend not trading with money one doesn’t have, especially when there are no other sources of capital to cover the worst-case risk in the individual trading setups.
@PravinJ ,
Hasn’t this budget targeted MTF trading as well?
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Hi,
@PravinJ Any idea based on your experience tracking MTF data and policies, is there usually any timeline or trigger (like exposure dropping below a certain threshold or volatility normalising) after which such counters see their leverage restored to earlier levels?
If there’s any informal indication from brokers or exchange communication you’ve come across about when SILVERBEES might go back to its previous MTF leverage, would love to know.
