Shares as Margin
Generate instant trading limits using shares in your Demat!
What is Shares As Margin?
Shares As Margin (SAM) lets you pledge existing shares held in your Demat Holdings to create instant trading limits. These limits can be used to trade in Intraday, MTF, Commodities (only selling/writing) and other leveraged products.
Trading limits generated while pledging shares will be less than the actual value of the stock. The difference between the value of the stock and limit generated is known as haircut and it varies from stock to stock.
How limits are calculated
If the value of shares pledged is Rs. 10,000, and the haircut percentage is 10%, the trading limits created will be
Value of shares pledged
₹ 10,000
Haircut of the stock
(₹ 10,000 X 10%)
Trading Limits
₹ 9,000
Value of shares pledged
Haircut of the stock
Trading Limits
₹ 10,000
(₹ 10,000 X 10%)
₹ 9,000
Key Features
Things to note
✓ In case you have both cash and limits in your segment and a buy order is placed, Shares as Margin limits will be blocked first, followed by cash.
✓ You will be charged Rs.29+ GST per security when you pledge/unpledge/invoke your shares.
✓ Whenever a corporate action like Bonus/Split/Merger is announced by a company, the Haircut percentage of the stock may gradually start to increase.
✓ Shares as Margin limits are updated daily based on closing prices and may be revalued during market hours in times of high volatility.
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Shares as Margin allows you to pledge the shares held by you in your Demat account and generate limits against those shares.
The limits generated can be used in:
- Margin Orders (MTF, Intraday)
- Futures and Options
- Commodities
Shares as Margin allows you to pledge the shares held by you in your Demat account and generate limits against those shares.
The limits generated can be used in:
- Margin Orders (MTF, Intraday)
- Futures and Options
- Commodities
While pledging shares, you get a trading limit after reducing a certain value of your holdings. This reduced value is called haircut and it varies from stock to stock.
For example, if the value of shares pledged is worth Rs.10,000 and the haircut of the stock is 20%. The limits created will be 10,000 – 20%* 10,000 = Rs. 8,000.
The pledge charges for Shares As Margin and MTF is as follows:
- Charge for Shares As Margin Pledge Creation/ Closure/ Invocation - Rs.29 + GST
- Charge for MTF Pledge Creation/ Closure/ Invocation - Rs.25 + GST
The value of the limits generated by pledged shares in Shares As Margin depends on the Quantity, Price and Haircut of the stock.
The formula for creation of limits is as follows:
(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.
Generally, the previous day’s closing price is taken as the Valuation Price of the stock. So, if the price of the stock starts to fall, funding limits that are generated by pledging the stock decreases, vice-versa as the price of the stock increases the funding limits are also increased. Limits will also vary due to changes in haircut% of the stock.
Whenever you take positions using Shares As Margin limits and the value of the limits starts to fall. The positions taken using those Shares As Margin limits may get squared off due to lack of sufficient margins.
Therefore, whenever you have taken F&O and Equity positions on the basis of limits arising from Shares As Margin, you are advised to track the prices of stocks and ensure that sufficient margin is always available.
*Please note Brokerage would not exceed the SEBI prescribed limit.