Margin Pledge

  • Pledging is a mechanism that empowers you to take the leverage of the stocks lying in your demat account for trading purposes. This is similar to borrowing funds by giving stocks as underlying assets.
  • The shares would be pledged by you with Upstox and in turn we would fund you to carry trade at exchange.

Read on to find out more on how to pledge or unpledge your shares with Upstox, the haircut, key points regarding margin allocation to your trading account, and other details:


1. How to pledge shares on Upstox?

You may refer to the link below for a step by step guide for pledging shares.


2. How is Pledge Value determined on Upstox?

  • Pledge value is determined by the closing price of the previous trading session. The quantity you wish to pledge, multiplied by the closing rate of the previous trading session, is your Gross Pledge Amount.
  • The gross pledge amount is deducted by haircut percentage, 100 % of this net amount would be  available for trading purposes.

For example You pledge 100 shares of ABC ltd and the previous trading session’s closing rate was Rs. 100 per share, and the scrip is liable to a haircut of 20%,then

Gross Pledge amount: 100 shares X Rs. 100 = Rs. 10,000

Net Pledge amount: Rs 10000 - Rs 2000 (20% haircut) = Rs 8,000

So you would be able to take an exposure on the Net value of Rs. 8000 on the securities pledged with Upstox.


3. What is Haircut?

Haircut is a percentage of risk which is liable for deduction from the gross pledge value as per the risk framework of any organisation. The haircut percentage is different for different scrips. The haircut percentage would be VAR or any rate as may be decided by Upstox, whichever is higher.


4. What purposes pledge value can be used on Upstox?

At Upstox, currently you can use Margin pledger towards derivative margin products i.e.:

Futures Buy / Sell

Option Selling


5. How to unpledge shares on Upstox?

You may refer to the link below for a step by step guide for unpledging Shares.

How to unpledge the pledged shares?


6. What are the applicable charges?

Pledging and Unpledging charges are Rs. 20 + GST per request.


Example for pledge request: 

You placed a request to pledge 100 shares of ABC Ltd and 100 shares of XYZ Ltd. In this case, your charges would be 40 + GST.


Example for unpledge request:

Continuing from the above example, suppose you placed one unpledge request of 100 Shares of ABC Ltd. and two unpledge requests of 50 Shares each of XYZ Ltd. Total unpledge charges would be Rs 60 + GST, since 3 unpledge requests were placed.

Note -Once stocks are pledged you will not be charged any charges till you unpledge them.


Cash to Collateral ratio shortage:

Cash to collateral ratio for the margin requirement must be 50:50. Whenever the available cash is less than 50% of your margin requirement, it would be considered a cash shortage. Such shortages would be liable to interest charges @ of 0.05% per day.

Example:

  • You have a Futures position with a margin requirement of ₹1,10,000.
  • Suppose your ledger balance is ₹20,000.
  • Shares pledged with Upstox are worth ₹1,00,000.
  • The cash component (ledger balance) is less than 50% of the margin requirement (i.e. ₹1,10,000)
  • An interest of 0.05% per day is applicable on the shortfall amount of ₹35000 (50% of ₹1,10,000 = ₹55000, available ledger balance is ₹20000, shortage amount - ₹55000-20000 =₹35000).

Invocation Charges:

In case the shares marked as margin pledge are required to be liquidated by Upstox (for reasons provided in liquidation rules) is termed as “Invocation”. The Invocation charges would be Rs. 50 + GST per instance and statutory charges.


7. What are Exposure and Liquidation Rules?

The exposure is available up to 100% of the collateral value after haircut and after deducting negative ledger balance (if any). Here are the liquidation rules:

  • If there's a negative ledger balance, your pledged stock can be sold anytime after the first day (T+1) to cover the deficit.
  • Any existing positions will be closed if your mark-to-market (MTM) loss reaches 70% of the available exposure provided to you. 
  • After exiting your positions, if there is any recoverable amount, your collateral can be sold to that extent anytime after the first day (T+1).

Note: Square off of position or collateral shall happen at the prevailing market price. Loss if any shall be borne by the client. All other RMS rules apply.


8. When can my Pledge or Unpledge request be rejected?

Pledge:

The clearing corporations have set Scrip wise market level and Broker level pledge limits. If at any point any scrips limit has been breached at Upstox level or any scrip is 90% of overall market level limit, your pledge request may be rejected.

Unpledge:

Unpledge requests would generally not be rejected, except where your ledger has a negative balance.


9. How to avoid collateral liquidation?

Collateral would be liquidated (invoked) only when the ledger is in debit. So to avoid liquidation you need to add funds to your Upstox wallet and have a positive ledger balance.


10. How to view the charges levied?

Though charges are calculated on a daily basis, the same would be reflected in your ledger report on a weekly basis .To access your ledger report, follow these steps:  

What is a Ledger report and how do I access it?