Let’s have a comparative overview of the pledging systems of the brokers we use here majorly in Unofficed - Zerodha, Upstox, Alice, Angel, and 5Paisa.
Zerodha’s Pledging system - support.zerodha.com/category/console/portfolio/articles/what-is-pledging
Upstox’s Pledging system - upstox.com/market-talk/margin-against-shares/
Let’s assume we bought 10 shares of Reliance in all the aforesaid brokers. The LTP of Reliance is 1971.55. Let’s say we bought at 1900. The net investment here is 19000 INR.
Let’s assume You pledged the shares on all those brokers mentioned. First question is - How much margin you will get against this pledged shares?
This is dynamic and this changes every day! At the end of each day, NSE releases a file to their site and based on that it is decided how much margin you will get tomorrow against the pledge.
Go to www1.nseindia.com/products/content/equities/equities/homepage_eq.htm (Google “nseindia haircut” to hunt this page.)
You will find two links -
Lets open the “Approved Securities” file to check on Reliance’s haircut! It shows
It means - You will get (100-17.96) % of share value as collateral. It comes to (19000*(100-17.96))/100=15587.6 INR.
Now, For discussion’s sake - Put Zerodha and Upstox to “Group 1” and Alice, Angel, and 5paisa to “Group 2”.
Group 1 Brokers:
- There are charges when you pledge. Zerodha takes 60. Upstox takes 50. (+GST) when you pledge.
- Zerodha and Upstox both maintain their own sheet for haircut calculation. They don’t follow NSE all time.
- Zerodha’s link is here - docs.google.com/spreadsheets/u/0/d/1vRI4NKpJ-3mnOWxUhSRMSQD5txy8QNumzSQrdfGKyL0/edit?usp=sharing.
- Upstox’s link is here - https://www.dropbox.com/sh/ajvp6wh8w3v57w6/AAAbsqUpoAY8kIUzJ98MwrJEa?dl=0&preview=Collaterals_JAN_2018.pdf# ( The link doesn’t work - It is generally 25% for securities and 10% for liquidbees for Upstox).
- Let’s say Reliance is trading at 2000 tomorrow. You can not sell that immediately. You need to unpledge the stock. Wait for one day and sell it.
Group 2 Brokers:
- No need to pledge. When you buy Reliance, You get 15587.6 INR immediately that day. It disappears the next day (T+1 Day - You get nothing.) and then again You get a full-pledged margin from T+2. It is basically automatically pledged at 0 INR cost.
- They follow the NSE site’s CSV only.
- Let’s say Reliance is trading at 2000 tomorrow. You can sell that immediately in this case!
Now, that’s the discussion on “How much”. Now, let’s see the usage parameters!
Group 1 Brokers:
- The cash to collateral ratio will be maintained at 50:50. That means, to use 15587.6 INR, You need to put 15587.6 INR of your own cash!
- Zerodha will charge 0.05% per day if debit balance happens.
- Upstox will not charge anything if debit balance happens. They will beg twice and kill your orders!
Group 2 Brokers:
- There is no restriction over cash to the collateral ratio. That means, to use 15587.6 INR, You have to just use 15587.6 INR.
- But if MTM is negative and Your margin becomes negative (incase You don’t have free cash) - They will report you to NSE immediately that same day and You will pay the hefty fine there unless You have margin trading facility activated.
- In the case of the Margin trading facility, You will just face 18% per annum interest over debit balance. (deducted on a daily basis in Angel and Alice (18% of the debit balance divided by 365), the monthly basis on 5paisa.)
This may sound wildly technical. But it’s dope.
Unofficed is a registered Authorized Person of all of them -