MTF (eMargin) - Opinions from Expert

[paxauquabriba-4876]

Can Anyone explain the statements below in layman terms using example of Lets Say Stock A = Rs100:​

Margin Trading Facility (Pay Later) Activation T&C | m.Stock

m.Stock MTF terms and conditions - Read the entire set of T&C online for Pay Later (MTF) Activation. More information on Pay Later (MTF) terms & conditions can be found on our page.

www.mstock.com

2(f) Mark to Market (MTM) losses on open eMargin positions to be calculated on daily basis and shall be adjusted from available margin. Accordingly, the Limit may lesser over a period of time. In case, the MTM loss breaches the prescribed threshold (currently 75%) of available margin, the position shall be squared off immediately to restrict further losses. It shall be the responsibility of the client to regularly monitor and review the margin availability and furnish the additional margin to MACM.

2(h) If mark to market loss of the client's eMargin open position exceeds 70% of the margin provided by the client, eMargin open position will be squared off / liquidated immediately. The client is therefore required to monitor his/her mark to market losses vis-à-vis margin availability on a real time basis.

2(i) Haircut shall be applied on stocks acceptable as collaterals at a percentage which can be higher than scrip Var+ELM. Such haircut % can be increased to 100% in case of corporate action in the securities provided as collaterals. In such cases, the client is required to immediately provide further margins in the form of funds, other shares as collaterals to avoid liquidation / square off of eMargin open position(s).

https://www.mstock.com/Content/pdf/part-b-of-account-opening-form-client-handbook.pdf

Rights and Obligations relating to Margin Trading Facility (“MTF”) ........................................................................................................22-24
Pg.23(9) Time period for liquidation of position/security shall be in accordance declared policy of the broker as applicable to all MTF clients consistently. However, the same should not be later than 5 working (trading) days from the day of 'margin call'. If securities are liquidated, the contract note issued for such margin call related transactions shall carry an asterisk or identifier that the transaction has arisen out of margin call.

Pg.23(11) Margin Trading Accounts where there was no transactions for 90 days shall be settled immediately.

 

[Raavan]

2 (f) Imagine you've bought Stock A using margin (borrowed money). The value of this stock can go up or down every day. Mark to Market (MTM) means calculating its current value daily. If the value falls and your losses reach 75% of the margin you initially put in, your broker will sell the stock immediately to prevent bigger losses. It's your job to keep an eye on this and add more money if needed to avoid selling at a loss.

2 (h) : If the value of your Stock A drops so much that your losses are 70% of the money you put in (the margin), your broker will sell the stock right away. To prevent this, you must watch how much you're losing compared to your margin and be ready to act quickly.

2 (i) If you use Stock A as collateral (like a guarantee) to borrow more money for other investments, the broker might reduce its value before accepting it (this is the haircut). During big company changes affecting Stock A, this reduction could be up to 100%. You'd need to add more money or other stocks as backup to avoid having your investments sold off.

23(9)
When you trade on margin (borrowed money), there's a risk of your investments losing value. If the value drops too much and your broker asks you to add more money (margin call), you must do so within a certain timeframe as per the broker's rules.
If you fail to add more money in time, the broker will sell some of your investments to cover the losses. This process is called liquidation.
Brokers have specific rules for how quickly they must sell your investments after a margin call. Normally, this must happen within 5 trading days.
If your investments are sold due to a margin call, the paperwork (contract note) will clearly indicate that it was because of a margin call.

23 (11) If you don't make any transactions in your margin trading account for 90 days, your broker will settle it immediately

 

[paxauquabriba-4876]

2 (f) Imagine you've bought Stock A using margin (borrowed money). The value of this stock can go up or down every day. Mark to Market (MTM) means calculating its current value daily. If the value falls and your losses reach 75% of the margin you initially put in, your broker will sell the stock immediately to prevent bigger losses. It's your job to keep an eye on this and add more money if needed to avoid selling at a loss.

2 (h) : If the value of your Stock A drops so much that your losses are 70% of the money you put in (the margin), your broker will sell the stock right away. To prevent this, you must watch how much you're losing compared to your margin and be ready to act quickly.

2 (i) If you use Stock A as collateral (like a guarantee) to borrow more money for other investments, the broker might reduce its value before accepting it (this is the haircut). During big company changes affecting Stock A, this reduction could be up to 100%. You'd need to add more money or other stocks as backup to avoid having your investments sold off.

23(9)
When you trade on margin (borrowed money), there's a risk of your investments losing value. If the value drops too much and your broker asks you to add more money (margin call), you must do so within a certain timeframe as per the broker's rules.
If you fail to add more money in time, the broker will sell some of your investments to cover the losses. This process is called liquidation.
Brokers have specific rules for how quickly they must sell your investments after a margin call. Normally, this must happen within 5 trading days.
If your investments are sold due to a margin call, the paperwork (contract note) will clearly indicate that it was because of a margin call.

23 (11) If you don't make any transactions in your margin trading account for 90 days, your broker will settle it immediately

the last one i.e 23 (11) i am little confused :

lets say i use margin to open a trade 1 on day 1 with stock A.
But i dont make any trade and/or trade 2 after that till 91st day.

Does that mean on 90th day Stock A will be liquidated by broker since no trading activity for 90 days ?

 

[Raavan]

the last one i.e 23 (11) i am little confused :

lets say i use margin to open a trade 1 on day 1 with stock A.
But i dont make any trade and/or trade 2 after that till 91st day.

Does that mean on 90th day Stock A will be liquidated by broker since no trading activity for 90 days ?

Y e s