Margin Funding

Why is my trigger price above the current price of the stock?

The trigger price of an MTF position is determined based on the margins provided at the time of position creation and the applicable minimum margin requirements.

This means that if the minimum margin requirement for a stock increases, or if funds are added to an existing position using the “Add Margin” option, the trigger price decreases.

Conversely, if the margin requirement decreases or the underlying value of funds supporting the position reduces, the trigger price increases.

One scenario for increase in trigger price occurs when Shares as Margin limits are used to create a position in MTF.

The Shares as Margin limits are calculated on a daily basis based on

• Haircut%
• Price of the stock

Limits: (Quantity of the stock deposited * Price of the stock) * (1 - Haircut% for the stock)

As the price of the stocks varies daily, the corresponding limits that are created by pledging the securities also change either up or down.

If shares are used as margin limits to create a position and the value of these limits declines due to daily revaluation, a margin shortfall may be created in the position.

Please find an example for your reference:

Initially:

Free Shares as Margin (SAM) Securities limits: 1000

Available Margin: 1000

After purchase of a stock in MTF

Free SAM Securities limits: 0

MTF Initial Margin: 1000

After daily revaluation:

Value of the pledge limits fall from 1000 to 900.

MTF IM: 900 (1000-100) – falls by 100

Free Securities: -100

Margin shortfall created: 100

Trigger price against the MTF position will increase due to the shortfall and the position will get squared off if sufficient free limits are not available.

You can avoid this by maintain sufficient free limits as buffer or by adding additional funds to your Stock segment.