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Margin Pledge vs MTF Pledge: Key Differences
By Shishta Dutta | Updated at: Jun 5, 2025 04:36 PM IST
Traders and Investors in the stock markets are looking at avenues to maximise returns on their investments. There are several tools to do the same, we are going to explore two such tools in this article, they are margin pledge and MTF – margin trading facility. Let us understand the difference between the two and how can they be used to boost trading capacity of investors.
Differences Between Margin Pledge vs MTF Pledge
Let us see some key distinguishers between margin pledge vs MTF pledge.
| Parameters | Margin Pledge | MTF Pledge |
| Purpose | Existing assets are pledged to secure more trading capital. | Additional trading capital is borrowed from the broker to buy more assets. |
| Collateral | Traders own assets are pledged as collateral. | Assets purchased from the borrowed capital are pledged to the broker as collateral. |
| Ownership | Ownership of shares is retained by the investor. | Ownership of the newly purchased assets lie with broker until repayment of funds. |
| Interest | Generally, there are no interest charges in margin pledging. | Borrowed funds are liable to interest charges. |
| Leverage | Leverage is calculated as per the value of the pledged assets. | Leverage is higher for MTF allowing traders to buy more assets. |
| Risk | Risk level is lower as there is no borrowing of funds. | Risk levels are high due to repayment of funds and accumulating interest charges. |
| Settlement | Settling of margin pledge loans can be done anytime. | Until the repayment of borrowed funds assets remain pledged to the broker. |
| Costs | Only brokerage fees are applicable. | Interest, transaction fee and brokerage fee are applicable making it costlier. |
What is Margin Pledge?
Margin pledge allows a trader to use their existing financial securities, such as shares and bonds as collateral to gain more capital. It is a simple process, rather than selling your exchange traded assets for cash liquidity, you can pledge them to a broker and gain leverage for trading. This aids investors in retaining their long-term investments while actively trading.
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What is MTF Pledge?
Let us understand the meaning of MTF pledge. While it works on the same principal of margin pledge, MTF has a few distinctions. MTF allows traders to borrow funds from the broker to boost their trading capital. Any asset purchased with MTF are pledged to the broker as collateral. MTF facilitates traders to take larger trades than their existing capital would allow. While this allows for potential amplified gains, it also has the potential for magnified loss.
HDFC Sky is Ideal for Margin Trading
HDFC Sky is a portal for traders and investors alike. It is a platform for anyone looking to participate in the financial markets. Trade in equities, bonds, future and option contracts, forex, commodities, etc. Powered by trading charts, and technical indicators, traders can keep abreast with real time global price movements. HDFC Sky also offers several margin trading tools for traders looking to leverage trade. Open demat account with HDFC Sky.
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FAQs on Difference Between Margin Pledge and MTF Pledge
Is the interest charged on Margin Pledge different from MTF Pledge?
Generally, there is no interest applicable on a margin pledge because the investor pledges his own assets. While MTF pledge incurs an interest charge since funds are borrowed from the broker to buy additional assets. Interest rates vary depending on the broker and the period of the loan.
What is the cost of an MTF pledge?
The cost of an MTF pledge typically includes brokerage charges, interest charges against the borrowed loan amount and any transaction costs associated with the purchase of the assets. These costs, fee and interest rates can be verified with the broker.
Is the settlement process different for Margin Pledge and MTF Pledge?
Yes, the settlement process are distinctly different. For margin pledge, settlement can be done anytime. It can also be modified as per the traders wish. While in margin trading facility pledgesecurities are held with broker until the entire repayment of burrowed funds and paying off all interest charges.
Are there any regulatory restrictions on using MTF Pledge versus Margin Pledge?
Yes, margin pledge and MTF pledge are overseen and regulated by authorities like SEBI (Securities and Exchange Board of India) to protect investor interests. SEBI enforces the limit on the amount of leverage allowed for MTF pledging, and brokers must adhere with these regulations strictly. Always stay updated with the latest guidelines from SEBI and other regulatory bodies before utilising pledging options.
