What is MTF in Stock Market?

Margin Trading Facility (MTF) is a financial service that allows traders and investors to purchase assets by borrowing funds from their broker. This allows the trader to purchase assets beyond their current capital. Margin trading is particularly popular with retail traders looking to leverage their funds and book higher profits by deploying MTF. The assets purchased with MTF trading serve as collateral with the broker until the loan is repaid. This collateral is a robust risk management system for the stock broker, protecting them from traders defaulting on their margin trading loans. It also helps the trader avoid overleveraging and over-margin trading. The funds provided by the broker are called a margin loan. These loans taken under a margin trading facility allow traders to purchase a high-value trade to amplify gains at a predetermined MTF interest rate on the margin loan.

How Does Margin Trading Facility (MTF) Work?

In simple terms, a Margin Trading Facility (MTF) means traders purchase assets by parking a small fraction of capital of the total trade value while borrowing the remaining funds from the broker by paying MTF interest rates. Let us assume a trader wants to purchase assets worth ₹10,00,000 but has only ₹5,00,000. The trader can utilise MTF to buy the shares by borrowing ₹5,00,000 from the broker. Assets purchased worth ₹10,00,000 by these funds remain as collateral with the broker until repayment of the margin loan. Margin trading facilities in the stock market fall under the purview of the Securities and Exchange Board of India (SEBI), which regulates margin requirements and asset eligibility for MTF. SEBI mandates brokers to have sufficient risk management procedures to safeguard brokers and investors against overtrading and overleveraging, especially with MTF in trading. Let us examine a margin trading facility in the stock market using a detailed example. For instance, a broker offers a 50% margin, and the trader wants to purchase shares worth ₹20,00,000; he needs to pay ₹10,00,000, while the broker lends the remaining ₹10,00,000. If the value of the MTF trade rises, the trader will book a profit on the entire ₹20,00,000. If the trade moves adversely, the trader will also lose the entire ₹20,00,000. This loss could very well exceed the trader’s initial investment of ₹10,00,000.

How to Buy Stocks Using Margin Trading Facility (MTF) with HDFC Sky

Let us see a step-by-step guide on how to buy shares using the margin trading facility (MTF) on the HDFC Sky trading platform:

1. Open an account: Open demat account enabled for the margin trading facility.
2. Check eligibility: It is recommended to check if your desired stock is eligible for MTF. Not all stocks can be traded in MTF trading. A detailed list of stocks eligible for MTF trading is available on HDFC Sky
3. Select stocks: Select your desired stocks from the eligibility list. While purchasing the stock, select the MTF facility toggle before you execute the trade
4. Pay the margin: Upon selecting the MTF trading option, the trader must fulfil the margin requirement by adding funds.
5. Execute the trade: Once the initial margin is paid, the trader can buy the desired stocks and execute the MTF trade.
6. Monitor performance: Monitor stock performance and ensure timely interest payments to avoid margin calls and forced liquidation of your MTF trade.

The margin trading facility on HDFC Sky is uncomplicated, secure and supported by advanced trading technology.

MTF on ETFs

Now invest in Exchange Traded Funds (ETFs) with the power of Margin Trading Facility (MTF).  With MTF, you can buy eligible ETFs by paying only a part of the total value – The rest is funded by your broker. This helps you amplify exposure while optimizing capital usage.

ETFs already offer diversification by tracking indices like Nifty 50, gold, or sectoral baskets. Combined with MTF, they become a smart choice for investors seeking capital efficiency and flexibility.

E-Margin Trading Facility (MTF) Interest Rates and Chargers

Typically, e-margin trading interest charges are 12%-15%. The HDFC Sky MTF rate is 12% i.e. 1% per month. The MTF interest rate is critical in determining the total cost of the trade. For example, if an MTF trade generates 10% profit, but the MTF interest rate is 12%, the trader is at a net loss of 2%. It is pertinent to note that interest rates vary from broker to broker. Traders must also wonder what MTF is in stock market transaction costs; these are charges levied on all transactions made while e-margin trading and MTF trading. They are typically a nominal percentage of the trade value. Other charges are regulatory levies and GST (Goods and Service Tax). The MTF interest rate is determined by factors like the sum borrowed, internal broker policies and current market conditions. Brokers tend to amend the rate of interest mid-trade to factor in market volatility or policy changes. For instance, hikes in bank interest rates may lead to an increase in the MTF interest rate. Higher borrowed funds attract higher interest rates, as the risk also increases. Some brokers offer tiered interest rates where big sums of borrowed funds are subject to progressively higher interest charges. The asset class of the trade also significantly influences the margin trading interest; volatile or less liquid assets attract higher rates. The broker determines MTF interest rates. Some brokers charge fixed interest, and some adjust rates as per the loaned amount. The period of the MTF trading loan affects the interest rate calculation as longer durations accumulate more interest. Clients with lower risk profiles based on their credit scores are given loans at lower MTF interest rates.

Features of Margin Trading Facility (MTF)

Let us discuss the significant features of margin trading in share market on HDFC Sky.

• Borrowing Power: This is the most significant feature of the margin trading facility. MTF increases your purchasing power by leveraging your current capital, sometimes up to 4x.
• Comprehensive stock list: Access the comprehensive list of securities available for margin trading in the stock market.
• Flexible repayment options: HDFC Sky typically charges MTF interest at a fixed monthly percentage. If necessary, the margin loan can be repaid by liquidating part of the MTF trade.
• Advanced technology: HDFC Sky has advanced tools, indicators, and charts ideal for successful MTF trades.
• Regulatory compliance: MTF trading is secure on HDFC Sky; it adheres to all regulations prescribed by SEBI and RBI.

These features ensure a reliable and user-friendly experience for traders using HDFC Sky’s MTF facility.

Benefits of Investing in Margin Trading Facility (MTF)

Let us see what margin trading in share market benefits:

• Increased Buying Power: Margin trading allows the trader to trade more assets by leveraging existing capital, which helps to amplify profits when the asset appreciates.
• Greater Flexibility: With a margin trading account, traders can seize opportunities to earn profits with restricted capital. It provides flexibility to trade in fast-moving market trends to execute timely trades and seize

Risks of Investing in Margin Trading Facility (MTF)

Let us see what MTF is in share market risk:

• Increased Risk: Margin trading is a double-edged sword. While it amplifies profits, it magnifies losses, too. If the trade moves adversely, the loss could easily exceed the capital invested.
• Interest Costs: Interest rates erode profits and add more costs to the trade. In case of loss, the trader still has to pay interest on the margin trading facility.
• Margin Calls: If the trade moves adversely, the maintenance margin depletes and breaches the minimum requirement, triggering a margin call by the broker. The trader is mandated to deposit additional funds immediately in the MTF account or face forced asset depletion.

Why Choose HDFC Sky for Margin Trading Facility (MTF)

HDFC Sky is an ideal platform for MTF trading for the following features:

• Competitive interest rates: HDFC Sky offers competitive interest rates on margin loans for MTF trading. All charges, such as transaction costs, GST, and brokerage charges, are well defined. Traders can expect absolute transparency and no extra hidden costs while MTF trading.
• Advanced technology: HDFC Sky is powered by trading view charts, which offer a host of indicators, real-time global market movements, and price action calculated in seconds to decades for better technical and fundamental analysis. These tools are important features of margin trading.
• Risk management features: The HDFC Sky portal has inbuilt risk management features, such as placing stop-loss orders, for efficient risk management in MTF trading.
• Regulatory compliance: HDFC Bank is a globally trusted bank that powers the HDFC Sky trading platform. Its legacy of trust and strict adherence to all SEBI-prescribed guidelines add a layer of security.
• Customer support: Offers round-the-clock assistance for hassle-free trading for all MTF trading investors.

Whether exploring MTF in trading or seeking expert services, HDFC Sky’s MTF facility is ideal for meeting diverse trading needs.

Use MTF Facility on HDFC Sky

HDFC SKY is an advanced trading platform. It provides a one-stop solution for all trading resources, such as a trading account and demat account, real-time access to global market movements, price actions, and detailed fundamental and technical analysis, which are crucial for achieving success in margin trading. HDFC Sky offers margin trading leverage, called the “Buy Stocks Pay Later” (BSPL) option. Explore MTF on HDFC Sky today.