Different Pledging Systems of Different Brokers of Indian Share Market

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/

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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?

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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 17.96 .

It means - You will get (100-17.96) % of share value as collateral. It comes to (19000*(100-17.96))/100=15587.6 INR.

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Now, For discussion’s sake - Put Zerodha and Upstox to “Group 1” and Alice, Angel, and 5paisa to “Group 2”.

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Group 1 Brokers:

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!

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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.)

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This may sound wildly technical. But it’s dope.

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Unofficed is a registered Authorized Person of all of them -

Group 1 Brokers - Upstox , Zerodha

Group 2 Brokers - Aliceblue , 5paisa and Angel Broking

Hey,
This might be a little out of scope.But do you know of any indian brokers that offer cash covered option selling.For instance if I own say 1 lot of stock A,I should be able to sell 1 lot of puts against the same.

A cash - covered put is a 2-part strategy that involves selling an out-of-the- money put option while simultaneously setting aside the capital needed to purchase the underlying stock if it hits the option’s strike price.

As per my understanding, If it is so, then you need a broker that allows physical settlement - Zerodha, 5paisa and Angel will allow that.

ok…According to this analysis,Group 2 Brokers seem better.What is your opinion on AliceBlue v/s Angel Broking?I trade acc. to my own strategy,don’t need any research etc that angel offers,just a trading execution system.

Edit : Also in Group 2 brokers,can you buy options with collateral margin?Zerodha has a restriction against that.

Fuck their research. That’s shit anyways.

Alice Blue is better. But You can try 5paisa if you need physical delivery. Angel’s RMS Support is not good and arrogant.

We have point contact support for 5paisa and Alice but not for Angel. So, brokerage is a support extensive business. I will recommend either 5paisa or Alice.

No restriction on how you will use your margin.

Suppose 2L margin before pledging and after pledge it is 2.5 L .
After trading I incurred a loss of 20k . so It will get deducted from initial 2L only right.
I have read some where they will sell holdings if the margin has incurred loss . Please clarify

Here free cash is 2L.
Collateral is .5L.

Whatever loss happens, first it will get deducted from Free cash.
After free cash is exhausted, the collateral gets hit. In that case - either you have to settle it EOD or the next day, shares will be sold out in mid day.

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