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How does block funds facility work for Margin Trading Funding (MTF)
Margin Trading Funding (MTF) allows traders to buy stocks by paying a fraction of the trade value, while the broker funds the remaining amount. The margin is released only after the position is squared off and settlement is completed.
Let’s understand with an example:
Fresh Position - BUY
Blocked Funds – 1,00,000
Scrip name – XYZ Ltd
Quantity – 100
Price – 500
Total / Trade value = Quantity X Price = 100 X 500 = 50,000
MTF Margin Required (25%) = 50,000 X 25% = ₹12,500 (Trader’s investment)
Broker’s Funding = Total Trade Value – Trader’s investment = 50,000 – 12,500 = ₹37,500
Debit:
- Margin of ₹12,500 from the blocked funds will be debited by approximately 4:00 pm.
- If there is any MTM loss, the same will be debited along with the Margin stated above.
- Applicable brokerage + taxes will be debited by approximately 9:00 pm
On Square Off at Profit:
Sell XYZ at ₹550 per share → 100 × 550 = ₹55,000
Broker Recovers Loan Amount: ₹37,500
Profit Calculation:
Profit = (Selling Value - Buy Price) × Quantity
(550 - 500) × 100 = ₹5,000
Interest Deduction (If Holding Period = 10 Days, Interest @12% p.a.*)
Interest = (₹37,500 × 12%) ÷ 365 × 10 = ₹123
Receivable Amount: ₹55,000 - ₹37,500 - ₹123 = ₹17,377
Credit:
- Receivable amount of Rs.17,377 will be credited on T+1 day (T being the trade date of square off) to the bank account .
- Applicable Brokerage + Taxes shall be adjusted in the amount stated above.
Let’s understand with an example:
Fresh Position - BUY
Blocked Funds – 1,00,000
Scrip name – XYZ Ltd
Quantity – 100
Price – 500
Total / Trade value = Quantity X Price = 100 X 500 = 50,000
MTF Margin Required (25%) = 50,000 X 25% = ₹12,500 (Trader’s investment)
Broker’s Funding = Total Trade Value – Trader’s investment = 50,000 – 12,500 = ₹37,500
Debit:
- Margin of ₹12,500 from the blocked funds will be debited by approximately 4:00 pm.
- If there is any MTM loss, the same will be debited along with the Margin stated above.
- Applicable brokerage + taxes will be debited by approximately 9:00 pm
On Square Off at Profit:
Sell XYZ at ₹550 per share → 100 × 550 = ₹55,000
Broker Recovers Loan Amount: ₹37,500
Profit Calculation:
Profit = (Selling Value - Buy Price) × Quantity
(550 - 500) × 100 = ₹5,000
Interest Deduction (If Holding Period = 10 Days, Interest @12% p.a.*)
Interest = (₹37,500 × 12%) ÷ 365 × 10 = ₹123
Receivable Amount: ₹55,000 - ₹37,500 - ₹123 = ₹17,377
Credit:
- Receivable amount of Rs.17,377 will be credited on T+1 day (T being the trade date of square off) to the bank account .
- Applicable Brokerage + Taxes shall be adjusted in the amount stated above.
Last updated: 3 Months Ago
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