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Brokerage charges on equity and F&O trades are largely based on the relationship between the client and the broker and hence there is no standard applicable rate. Here we look at margin trading charges and margin trading brokerage. Normally, there is no separate margin trading brokerage that is levied and the usual brokerage contracted for cash delivery, cash intraday, futures, and options is applicable on margin trades also. There are no separate margin trading fees or margin trading charges imposed on the customer, other than the interest charged on the debit in the margin account.
To understand margin trading fees and margin trading brokerage, we look at various types of trades that you can put in the MTF account and look at the overall margin trading brokerage inclusive of all statutory charges. That will give you the total margin trading charges applicable. Here is a detailed look at the margin trading charges applicable in margin trading.
Brokerage rates are contingent on the relationship between the broker and the trader and vary from broker to broker. For example, discount brokers offer much lower rates of discount compared to full-service brokers. Let us look at the margin trading brokerage for different types of transactions.
Brokerage and other charges for equity delivery
The following are the key charges applicable in this case.
Brokerage and other charges for equity intraday
The following are the key charges applicable in this case.
Brokerage and other charges for equity futures
The following are the key charges applicable in this case.
Brokerage and other charges for equity options
The following are the key charges applicable in this case.
In addition to the above charges, some additional costs that traders have to bear include call-n-trade charges, stamp charges, DP debit charges, pledge charges, DP AMC charges, off-market transfer charges, payment gateway charges, etc.
Here is what margin trading or buying on margin entails. Let us assume that you want to buy 10,000 shares of the State Bank of India. If you buy 10,000 shares of SBI in the equity market, it would cost nearly Rs.33 lakh to take delivery of that stock assuming the approximate current market price of Rs.330 per share. In case, you do not have the requisite funds in your trading account, you can open a margin account and trade with the broker. The margin account can be activated by eligible clients by just accepting the additional terms and conditions. Remember, only corporate brokers can offer margin trading.
Remember that the margin trading facility requires you to activate the margin trading facility once at the beginning. You don’t need to do it each time. There are various ways of activating your margin trading.
You can use your regular trading and linked Demat account to activate the margin trading facility. The activation is normally done within 24-48 hours and once that is done then the value of shares in the linked Demat account automatically become eligible as margin based on the previous day’s closing value of the stocks.
Once the margin account is opened, then the interest is only charged on the amount of debt that stands to your trading account. If the trading account is having a credit then there is no interest charged for the margin trading facility so it almost operates like an overdraft facility.
If you are having surplus account in your margin account, you can always withdraw money from the margin account. However, ensure that the minimum maintenance margin is maintained. Alternatively, you can leave margins if you plan to take margin positions in the next couple of days in case an opportunity arises.
You need to fund at least 20-25% of the position you plan to take and the balance can be bridged through margin funding. You can take a decision on how much money you must keep in the margin account based on that calculation.
Both have their merits and demerits. In a pure cash account, there is no leverage, however, the leverage risk is not there as all your equity positions are full paid for. However, in case you need to take larger positions in conviction calls, then margin account can be extremely useful. You don’t need to bring in fresh funds to capitalize on short term stock price appreciation trends.
While that is not necessary, there are two things you need to remember. The margin in your margin account hardly earns anything worthwhile. Hence you must keep enough funds to take care of your current position margins and any margin calls you may have to attend. Otherwise, you must not keep funds idle in the margin account as it is generally unproductive.
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