Definition
Margin Trading Facility (MTF)
Margin Trading Facility is a SEBI-regulated facility that lets investors buy shares by paying only part of the value upfront, with the broker funding the balance against the shares as collateral.
Under MTF, an Indian investor can take leveraged delivery positions in approved (Group I) securities, paying an initial margin and borrowing the rest from the broker, who charges interest on the funded amount. The bought shares are pledged as collateral, and positions can be carried forward beyond the settlement cycle.
MTF is distinct from intraday leverage and from the derivatives segment; it provides leveraged cash-market exposure with delivery. SEBI mandates margin requirements, eligible-securities lists and pledge mechanisms to contain risk. Investors must watch interest costs and margin calls, as leverage magnifies both gains and losses.
Related terms
- Margin (Trading)Margin is the collateral a trader must deposit to cover potential losses on a position, comprising components such as SPAN, exposure and mark-to-market margin in the Indian derivatives market.
- Securities Lending and Borrowing (SLB)Securities Lending and Borrowing is a regulated mechanism that lets investors lend their shares for a fee to borrowers who need them, typically to facilitate short selling or settlement.
- Pledge and Re-pledgePledge and re-pledge is the SEBI-mandated mechanism for using securities as collateral, where shares stay in the client's demat account and are pledged in favour of the broker, who re-pledges them to the clearing corporation.
- Square-offSquare-off is the closing out of an open position by taking an equal and opposite trade, either voluntarily by the trader or automatically by the broker when margins fall short or intraday positions near the cutoff.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.