A Comprehensive Guide to MTF in Zerodha

Zerodha's Margin Trading Facility (MTF) is a great way to trade with leverage, but it's essential to understand how it works. The MTF allows you to borrow up to 20 times the value of your trading account.

To be eligible for MTF, you need to have a Zerodha trading account with a minimum balance of ₹50,000. This is a straightforward requirement that ensures you have sufficient funds to cover potential losses.

The MTF interest rate is 18% per annum, which is relatively high compared to other lenders. This highlights the importance of managing your margin calls and avoiding excessive borrowing.

With MTF, you can trade with leverage, but it's crucial to monitor your margin balance closely to avoid margin calls. This can be done by regularly checking your account balance and adjusting your trades accordingly.

If this caught your attention, see: Futures Margin Requirements Tradestation

Zerodha's MTF (Market to Market) facility allows you to square off your open positions at the end of the day, eliminating the risk of overnight price movements.

If this caught your attention, see: Ibkr Pre Market

You can use MTF to close your positions at the closing price of the previous day, ensuring you don't incur any losses due to overnight market fluctuations.

The MTF facility is available for all types of instruments, including equity, currency, and commodity.

You can enable MTF for your account through the Zerodha platform.

By using MTF, you can avoid the risk of overnight price gaps and ensure that your open positions are squared off at a fair price.

See what others are reading: Spot Price vs Strike Price

Using MTF on Kite is quite straightforward once you know the ropes. Your MTF holdings will be labelled with an M tag on the Kite holdings page.

To exit your MTF position, hover over the stock and select Options. Click on Exit to sell the MTF quantity.

Alternatively, you can add the stock to Marketwatch and exit using the MTF order type. This is a convenient way to manage your MTF positions.

Enabling MTF on Kite requires a few steps. If your account has PoA or DDPI enabled, MTF can be enabled instantly. If not, enabling MTF takes about a day.

For MTF trades, Zerodha will email you a pledge request at 4:30 PM, which you must accept by 7 PM the same day. Make sure to keep an eye on your email for these requests.

Here's a quick summary of the steps to exit an MTF position on Kite:

It's worth noting that enabling MTF on Kite can take some time, but it's a necessary step to start using this feature.

The maximum funding allowed under MTF is ₹50 lakh per account. This is a significant amount, but it's essential to remember that there's a limit of ₹10 lakh per stock.

You can use this funding to trade multiple stocks, but each stock has its own cap. This means you can't exceed ₹10 lakh for any single stock.

Keep in mind that this funding limit applies to each MTF account, so you can have multiple accounts with different funding limits.

For another approach, see: Difference between Buy Stop and Buy Limit Order

Trading on the Multi-Asset Trading Facility (MTF) in Zerodha is a seamless experience. With Zerodha's robust infrastructure, you can trade a wide range of assets, including stocks, futures, options, and currencies.

One of the key benefits of trading on the MTF is the ability to execute trades quickly and efficiently. According to the article, the MTF allows for real-time order execution, which reduces the risk of slippage and ensures that your trades are executed at the best possible price.

To get started with trading on the MTF, you'll need to understand the different types of corporate actions that can impact your trades. For example, mergers and acquisitions, stock splits, and dividend payments can all affect the price of your stocks.

Suggestion: Placing Trades with Trading View from Tradestation

If you buy stocks using Margin Trading Facility (MTF), they'll be closed one day before the ex-date for any corporate action, except for bonuses, stock splits, dividends, and rights issues.

This means you won't have to worry about your MTF positions being affected by most corporate actions, but it's still essential to keep an eye on your holdings.

Here are the corporate actions that will close your MTF positions:

Keep in mind that you can hold shares purchased using MTF as long as you want, but you'll be charged an interest rate of 0.04% per day on the funded amount, which is ₹40 per lakh.

To buy stocks using MTF, you must first activate DDPI, which is a prerequisite for placing a buy order through the MTF section on the order window.

You can place a buy order from the MTF section on the order window, but there's a catch - you'll receive a pledge request by 5:30 PM on the same day.

To make the MTF order successful, you must accept the pledge request before 7 PM, or else it won't go through.

The cut-off time for pledging MTF stocks is before 7 PM on the same day, so make sure to act quickly to avoid missing the deadline.

You can pledge MTF stocks before 7 PM on the same day, but missing this deadline can result in your order being unsuccessful.

Suggestion: Amo Order Timing in Zerodha

You can trade on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) in India, two of the country's major stock exchanges.

The NSE and BSE are the primary stock exchanges in India, where you can buy and sell securities.

Zerodha, a popular trading platform, currently offers Multi-Trade Facility (MTF) only on the NSE, not on the BSE.

This means you can execute trades on the NSE with Zerodha, but not on the BSE through this platform.

On a similar theme: Algorithmic Trading Platforms

As you explore the world of trading, you might come across AMO and GTT orders. Currently, these types of orders cannot be placed using MTF. AMO and GTT orders are not available through MTF.

However, it's worth noting that this limitation will be lifted soon, allowing for greater flexibility in your trading strategies.

Related reading: Limit Orders

To trade on Zerodha's Margin Trading Facility (MTF), you must be a registered user with a valid trading account.

Only Indian residents with a PAN card and a bank account are eligible to open a trading account with Zerodha.

You must be at least 18 years old to open a trading account and use MTF.

As per the guidelines, you can't use MTF if you're a non-resident Indian or a foreign national.

Trading on MTF requires POA/DDPI due to operational complexities. This means that users need to have POA/DDPI enabled to access MTF.

MTF is only available for users with POA/DDPI enabled. This is a straightforward requirement that ensures a smooth trading experience.

NRIs, minors, and custodial participants are not eligible for MTF with Zerodha.

Investing with Zerodha's MTF is not for everyone. NRIs, for instance, are excluded from this option.

Minors are also not allowed to invest using MTF with Zerodha. This is likely due to the need for adult oversight and decision-making.

Custodial participants, who are typically minors with a guardian or trustee, are also not eligible for MTF with Zerodha.

Risks of MTF are real, and it's essential to understand them before using the facility. Leveraged trading can be a double-edged sword, and time is not always on your side.

With equity delivery trades, you have the luxury of holding onto a stock for a longer period, giving the price time to recover. However, with MTF, time works against you, and each passing day costs you 0.04% of the funded amount.

The interest rate of 0.04% per day may seem negligible, but it adds up quickly. For every ₹1 lakh borrowed, you'll be charged ₹40 per day. This can eat into your potential profits, especially if you're holding onto a stock for an extended period.

The costs associated with MTF are straightforward: interest, brokerage, pledge charges, and square-off charges. Here's a breakdown of these costs:

It's essential to stay informed, diversify your investments, and have a clear exit strategy to navigate the risks effectively and unlock the full potential of MTF.

Let's break down the costs associated with using MTF.

Interest charges are applied from the day after the transaction (T+1) until the stocks are sold, and they amount to 0.04% per day, or ₹40 per lakh on the funded amount.

Brokerage charges are a flat fee of 0.03% or ₹20, whichever is lower.

You'll also need to pay a pledge charge of ₹30+ GST per ISIN per pledge, but there are no charges for unpledging.

Square-off charges are ₹50 + GST per order squared off by Zerodha.

Here's a quick rundown of the charges:

The costs and charges associated with Margin Trading Facility (MTF) are something to carefully consider. With MTF, you'll be charged interest on the borrowed amount at a rate of 0.04% per day, which translates to ₹40 per lakh per day.

These interest charges start from T+1 day and continue until the stocks are sold. This means that the longer you hold onto the borrowed stocks, the more you'll be charged in interest.

Expand your knowledge: Stocktrade Charges

MTF also comes with brokerage charges, which are 0.03% or ₹20, whichever is lower, per executed order. This is a standard brokerage fee that applies to all trades.

In addition to interest and brokerage, you'll also be charged pledge charges of ₹30 + GST per ISIN per pledge. However, there are no charges for unpledging, which is a relief.

Lastly, there's the square-off charge of ₹50 + GST per order squared off by Zerodha. This is a one-time fee that's applied when you close your position.

Here's a summary of the costs and charges associated with MTF:

Zerodha had been hesitant to launch MTF in the past due to its risks.

The company observed the rising adoption of such facilities in the industry and the higher contract values in derivatives.

Offering MTF was important for Zerodha to stay competitive, as it was the only major broker not offering this feature until now.

Zerodha finally decided to introduce MTF to keep up with the industry standards.