Upfront Margin
Use Your Existing Shares as Margin & Start a Trade with ZERO Upfront Cash
Imagine you spot a great buying opportunity in your favourite stock. You want to buy it right away, before the stock price runs up.
But you are not able to buy the desired quantity because you have limited funds in your trading account.
In the stock markets, time is money. Forget hours, even a few seconds can make a big difference.
Start a Trade with Zero Cash
Use your existing shares as margin. Just keep your shares pledged and be trade ready. So, whenever a trading opportunity arises, you can act instantly.
If you wait to transfer funds from your bank account to your trading account, it could result in a missed opportunity.
With Kotak Neo, you never have to worry about missing any opportunity. We have the perfectly designed solution for you.
Make the most out of your trades
If you wish to buy and hold stocks in your demat account, you just need to provide the minimum upfront amount on trade (T) day, which can be as low as 20% for several stocks.
Thereafter, you have two days to transfer the balance amount to your trading account. So, you can let the balance amount be in your bank account and earn interest on them for two extra days. After all, every rupee counts.
Finally, the shares get delivered to your demat account on T + 2 day, i.e., two trading days after you initiated the trade.
Example: Let’s say you wish to purchase a stock worth Rs 1 lakh. If the required upfront margin for the stock is 20%, you can initiate your equity delivery trade by providing an upfront margin of Rs 20,000 before placing your trade on trade (T) day. You have the convenience of two additional days to pay the balance amount of Rs 80,000.
For your intraday trades, you just need to provide the minimum upfront margin before you place your order. As we just explained, this amount could be as low as 20% of the trade value for several stocks. This means that you can get up to 5 times exposure on the upfront amount that you provide.
Example: If the required upfront margin for a stock is 20%, you can initiate an intraday position worth Rs 1 lakh by providing just Rs 20,000 as upfront margin. Once you square off the trade, the margin amount is released, which you can then use to initiate other trades.
Buy Today Sell tomorrow (BTST) is a facility specially designed for astute traders who aim to benefit in a shorter period of time at a fraction of the cost. In a BTST trade, you can sell shares even before getting the delivery in your demat account.
In an ideal scenario, when an investor purchases shares, he is allowed to exit the position only after getting the actual delivery of the shares in the demat account, which as per the settlement cycle happens on T+2. In other words, shares bought on Monday are likely to be credited to your demat account on Wednesday evening after complete receipt of payment.
So with BTST, you get the twin advantage of taking the desired larger position at a fraction of the cost, and the flexibility to exit the position anytime during the immediate next two trading sessions.
Before you initiate a BTST trade, you need to provide a minimum upfront amount on trade (T) day, which can be as low as 20% for several stocks. This upfront margin is the same as it is for intraday trades.
But here is the difference...
For your BTST trades, you need to provide margin for the sell leg of the trade also.
Example: If the required upfront margin for a stock is of 20%, you can initiate your BTST trade worth Rs 1 lakh on trade (T) day by providing an upfront margin of Rs 20,000. On the next trading day (T+2), you need to provide additional margin of 20% (Rs. 20,000) before you place the sell order for your BTST trade. In other words, you need to maintain a minimum total margin of Rs 40,000 before you place the sell order for your BTST trade.
Ways to Provide Margin for Your Trades
The easiest and fastest way is cash. In order to provide margin for a trade, you can simply transfer the required amount by way of a fund transfer from your bank account to your trading account.
Is there another way to provide margin?
Yes, in fact, you can even start a trade without having to make any fund transfer. Kotak Neo offers you the option to start a trade with zero upfront cash.
Use Your Existing Shares as Margin & Start a Trade with ZERO Upfront Cash
Instead of paying upfront cash for starting a trade, you can use the existing shares/securities in your demat account to fulfil the upfront margin requirement.
You just need to follow a simple and secure OTP-based pledging process with NSDL and avail margin against your shares/securities.
In this case too, you would have two days to make payment for your stock purchase.
With this facility, you can take full advantage of the existing shares/securities in your demat account for starting new trades.
Once we receive the confirmation from NSDL, we shall provide margin against the selected shares/securities. Check the margins here.
Note: There will be a time lag to consider your shares/securities as margin since there is no real time confirmation of pledges provided by the Depositories as of now. As such, it is recommended that you pledge your shares/securities in advance so that when you wish to start a trade, you have the margin already available.
Frequently Asked Questions
Here’s how you can pledge your securities on different trading platforms:
Kotak Stock Trader App (KST)
- Under ‘More’, click on the ‘Pledge for Margin’
Website
- Under the main menu, place the mouse pointer on the ‘Funds’ tab and click on ‘Pledge for Margin’
- Under the main menu, head to ‘My Investments’. Go to ‘DP’ and then head to ‘Available Stocks’. Click on ‘Pledge for Margin’
Please see the detailed process here.
Trade Smart Terminal (TST)
- Under ‘Funds’, click on ‘Pledge for Margin’
- Under ‘Limits’, go to ‘Limits Given Against Shares’. Then click on ‘Pledge for Margin’
Keat
- Go to 'Weblinks' and click on 'Pledge'
Please note that Kotak Neo will initiate a pledge request on your behalf on net long positions at the end of the day. This is applicable for MTF as well as normal trades.
In case you want to sell your pledged securities, you need not worry. The pay-in obligation to the exchange will be managed by Kotak Neo.
To release your unutilised pledged securities, you can call our customer service / your dealer to initiate the release.
For now, the pledge charge is Rs. 20/ ISIN. (These charges may be subject to revision from time to time.)
In case your trading account is funded with the required trade value while initiating the Buy order, you have absolutely nothing to worry about.
On T (trade date) and T+1 day, only the upfront margin requirement will be blocked. The balance amount will be debited on T+2 day. This will be completely managed by us.
For availing this facility, you need to select the default order type – Normal (NRML).
Margin is the minimum amount you need to maintain during a trade. There are two components to the margin requirements prescribed by the Exchange.
Upfront Margin
Margin that is required before placing any trade. This could be as low as 20% as per the new norms. However, the broker may collect higher upfront margin basis internal policy.
Additional Margin
The additional margin prescribed by the Exchange has to be collected within 2 trading days.
Example: Assume that you wish to initiate a Buy order worth Rs. 100,000 for a certain stock. Let us say its upfront margin requirement is 20% and additional margin to be maintained within two trading days is 18%. In this case, Rs 20,000 will be instantly blocked as upfront margin at the time of placing the Buy order (T day). The remaining margin requirement of Rs 18,000 (plus mark-to-market (MTM) losses i.e. unrealised loss on the position, if any) needs to be fulfilled within two trading (T+2) days to avoid exchange penalties.
Please Click Here to check stock-wise margin requirement in the cash segment
20% is the minimum upfront margin requirement as prescribed by exchange and it is applicable in several select stocks.
Also, while this facility is available for most of the stocks, the upfront margin may vary depending on the categorization of the stocks, basis our risk management policy.
Please Click Here to check the margin requirement for your desired stock.
Balance margin is the difference between the total Exchange-prescribed margin and the upfront margin collected at the start of a trade.
You are supposed to pay the balance margin within 2 trading days of the Buy transaction. This margin can be in the form of funds and/or by way of pledging your existing shares/ securities.
No, it is not at all necessary. You can place an intraday square off trade and close the trade on the same day. You can also square off the position on the next day. Just ensure that you have sufficient margin.
In case you fail to pay the balance margin due within two trading days, you would be liable to pay penalties as levied by the exchanges.
Once you have initiated a trade, you have the flexibility to clear the balance outstanding amount (Total Traded Value Less Margin Provided) at your convenience. Just ensure that the additional margin is maintained on T+2 day.
On T+3 day, the shares will be moved to Client Unpaid Securities Account (CUSA), which is a separate account that holds shares of clients who have not fully paid for their share purchases. The shares will be held in CUSA for five trading days (T+3 to T+7). During this period, you have the flexibility to clear the balance amount via fund transfer or pledge shares for margin and get the shares credited to your demat account. (Interest charges will apply on the outstanding amount.)
However, if the shares are not pledged or the balance amount is not cleared within T+7 days, we will be constrained to liquidate the shares.
If you have provided margin in the form of pledged shares, you have the flexibility to clear the total outstanding amount at your convenience. Just ensure that the additional margin is maintained on T+2 day.
On T+3 day, the shares will be moved to Client Unpaid Securities Account (CUSA), which is a separate account that holds shares of clients who have not fully paid for their share purchases. The shares will be held in CUSA for five trading days (T+3 to T+7). During this period, you have the flexibility to clear the balance amount via fund transfer or pledge shares for margin and get the shares credited to your demat account. (Interest charges will apply on the outstanding amount.)
However, if the shares are not pledged or the balance amount is not cleared within T+7 days, we will be constrained to liquidate the shares.
No, this is absolutely free.
However, do note that you may be charged interest in the following cases:
- You have availed margin against shares by way of pledge.
- You have provided the required margin, but have not cleared the full outstanding amount.
All MTM losses must be paid along with balance margin by T+2.
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Normal (NRML) is a facility that allows you to purchase stocks by paying upfront margin and clearing the balance outstanding at your convenience. Just ensure that the additional margin is maintained on T+2 day. On T+3 day, the shares will be moved to Client Unpaid Securities Account (CUSA), which is a separate account that holds shares of clients who have not fully paid for their share purchases. The shares will be held in CUSA for five trading days (T+3 to T+7). During this period, you have the flexibility to clear the balance amount via fund transfer or pledge shares for margin and get the shares credited to your demat account. (Interest charges will apply on the outstanding amount.) However, if the shares are not pledged or the balance amount is not cleared within T+7 days, we will be constrained to liquidate the shares.
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MTF allows you to buy stocks on margin and you can hold them for as long as you want. As this trade will be funded by us, you will incur interest charges on the outstanding amount. Also, you are required to pledge your MTF positions using the online pledge facility.
If you are an astute trader looking to take advantage of the likely overnight volatility, then BTST fits your bill. Unlike intraday trading, BTST gives you the time benefit of two more trading sessions to possibly benefit from short-term volatility.
No. BTST is not allowed for stocks in the T2T segment as per the risk management policy of Kotak Neo. Stocks in the T2T segment are automatically marked for delivery.
The risk associated with BTST is the possibility of short delivery. What does short delivery mean? And what could be the reason behind it? Let us explain…
In a BTST trade, you are exiting a trade before settlement. In other words, you are selling shares before taking delivery. To meet your obligation, you need to provide delivery of these shares. But in case the original seller from whom you purchased the shares fails to deliver the shares to the exchange, it may result in short delivery. In turn, your obligation toward the exchange may not be fulfilled.
In order to meet margin requirements without any hassles, all you need to do is ensure that you maintain a minimum of 40% margin on your BTST trades. In case of select stocks, you can initiate a trade with a minimum of 20% upfront margin on Trade (T) day, and then fulfil the balance 20% margin requirement on the next trading day (T+1), before placing your sell order. [As per the revised SEBI guidelines effective from 1st September, 2020, you need to provide margin even while placing a sell order.]
In short, one needs to keep in mind the total margin requirement for the trade/ position before initiating any BTST trade. For all stocks wherein the buy leg (T day) margin requirement is lower than 40%, an equivalent amount of margin will be required for placing the sell order on T+1 day. However, in cases where the buy leg (T day) margin for a position is 40% or higher, you need not provide any additional margin for placing the sell order.
Let us explain with three simple scenarios:
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Upfront margin provided = 20% Let us say you start a trade worth Rs. 100,000. Since the required upfront margin is 20%, you provide a margin of Rs. 20,000 on trade (T) day. As we explained above, if you wish to sell the stock the next day (T+1), you need to maintain a minimum total margin of 40% before placing the sell order on T+1. Since 20% was already provided on T day, you need to provide another 20% by T+1. So, once you have provided a margin of Rs 40,000, you can sell the stock on T+1.
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Upfront margin provided = 33% In this case, the stock that you wish to buy has a higher upfront margin requirement of 33%. For your trade worth Rs 100,000, you provide margin worth Rs 33,000 on the trade (T) day. Thereafter, if you wish to sell the stock the next day (T+1), you need to provide additional margin of Rs 33,000 (33%). As such, the total margin required on such a BTST trade will be 66%.
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Upfront margin provided = 50% Basis our internal policy, some stocks may even have an upfront margin requirement of 50%. Taking the same example, you would have to provide Rs 50,000 as upfront margin on T day.
What next? Would you need to provide additional margin on T+1?
No, you wouldn’t need to provide any additional margin as you have already maintained more margin than the minimum requirement of 40%.
In fact, once you sell the stock on T+1, the additional margin of Rs 10,000 (10%) will be released, which you can immediately use for other trades.
To check stock-wise margin requirements in the cash segment, Click here.
Note: Upfront margins are required to be provided in advance of trade. Other margins such as Mark-to-market margin (MTM), delivery margin, special/additional Margin or such other margins as may be prescribed from time to time, shall be collected within 'T+2' working days from the clients. The clients must ensure that the upfront margins are paid in advance of trade and other margins are paid as soon as margin calls are made by the Brokers.