MTF - Margin Trading Facility

What is Margin Trading Facility (MTF)?

Margin Trading Facility (MTF) is a SEBI-regulated facility that lets you buy more stocks than your available cash allows. You pay a part of the trade value upfront, called the initial margin, and your broker funds the rest. The shares you buy are held as collateral until you repay the funded amount. In short, MTF turns limited capital into higher buying power, while you pay interest on the money the broker lends you.

The full form of MTF is Margin Trading Facility. It is sometimes called "Pay Later" or "Buy Now Pay Later" for stocks, because you take delivery of shares today and settle the funded portion later. Because it uses leverage, MTF can amplify both gains and losses, which is why SEBI permits it only on a defined list of liquid stocks and ETFs known as Group I securities.

With Kotak Neo, you get up to 4X leverage on 1500+ eligible stocks, with interest rates starting at 9.69% p.a. and flexible holding periods, so you can hold an MTF position for as long as your strategy needs.

How does Margin Trading Facility (MTF) work?

Margin Trading Facility (MTF) enables investors to buy eligible stocks by paying only a part of the total investment amount upfront, while the broker funds the remaining amount. Here's how the process works:

• Choose an eligible stock: Select a stock or ETF that is approved for trading under the SEBI-regulated MTF framework.
• Pay the initial margin: Deposit a percentage of the total trade value as the initial margin. The exact margin requirement depends on the stock and applicable regulations.
• Broker funds the balance: The broker finances the remaining amount, allowing you to purchase more shares than your available capital would otherwise permit.
• Shares are held as collateral: The purchased shares are automatically pledged as collateral against the funded amount until the outstanding balance is repaid.
• Pay interest on the funded amount: Interest is charged only on the amount funded by the broker for the duration the position remains open.
• Close or convert the position: You can either sell the shares to repay the funded amount or pay the outstanding balance to convert the position into a fully owned delivery holding.

Let us understand this through an example:

MTF Eligibility Criteria

MTF is available to any investor with an active Kotak Neo trading and demat account who has accepted the MTF terms. SEBI allows margin trading only on Group I securities, a list of liquid, lower-volatility stocks and ETFs. Hence, only select stocks are eligible. Kotak Neo offers MTF on 1500+ eligible stocks, and the approved list is updated as exchange classifications change. Before you trade, check the current MTF stock list to confirm a stock is eligible and to see its applicable margin.

MTF Interest Rates & Charges

MTF interest is charged only on the amount your broker funds, and only for the days you hold the position. Kotak Neo MTF interest rates start at 9.69% p.a., which works out to a per-day cost of roughly ₹14 on every ₹50,000 funded. Because the charge accrues daily, the longer you hold an MTF position, the more interest you pay.

Beyond interest, MTF charges can include standard brokerage, pledge and unpledge charges levied by the depository, and statutory costs such as STT, exchange transaction charges, GST and stamp duty. There are no hidden charges with Kotak Neo, and you can estimate every cost before you trade using the calculator below.