To get higher exposure you can deposit the cash or use stocks in your demat account as collateral. When a client pledges the share to get extra intraday exposure or overnight position, the shares used to be transferred to the broker’s margin account (from client’s demat account to broker’s demat account for margin purpose). Broker in turn would transfer these stocks to Clearing Member and then to the Clearing Corporation. For the security of client securities SEBI has introduced the new system.
What has changed?
In the new system, client’s holdings will not get physically transferred to the broker’s margin account. Instead, just a pledge (lien) is marked in favor of the broker and the stocks will continue to reside in the client’s account. The broker further pledges the stocks in favor of Clearing Member and then the Clear Corporation (CC) through a process called margin re-pledge and gets the margins from CC.
As per this process you will be required to approve your pledge request by entering an OTP sent to your registered email/SMS from CDSL to authenticate the pledge transaction. Please make sure that your mobile number and email address are updated with us to avoid any last minute inconveniences
Process to place pledge request in the new system
- Login to BOX
- At the left side, click on Margin Against Shares > Pledge > Pledge Shares
- In Pledge More section, enter the quantity to be pledge
- Click on Pledge Button at the right bottom corner.
- You will receive One Time Password (OTP) and will be redirected to CDSL’s Margin Pledge Transaction Verification screen which shall contain your demat details along with scrips which you wish to pledge.
- Enter OTP and submit. Now you’re done with the process
Once the process is completed, you shall get the collateral benefit on the next trading day.
Process to place unpledge request in the new system
To unpledge the shares in the new system, you would be required to place the request from BOX back office. Kindly note that initially shares may not be unpledged by selling the stocks in the open market as the case was with the old pledge system. Currently this feature is not allowed by us as it needs to be tested. However, we are working on adding this feature soon.
Also please note:
- You shall not be allowed to sell the pledged shares. We are working on adding this feature soon
- In case of any fund transfer made on any trading day then the benefit of cash to collateral shall be given from next trading day
- The pledge charge is Rs 15 and the unpledge charge is Rs 15
- Please update your email and mobile number to be able to get the OTP from CDSL
- Non-authenticated margin pledge transactions will be ‘Cancelled’ at the end of request date
- You can place pledge request even if you have not updated your POA/DDPI
The purpose of share pledge
- Pledging of shares to take loan in the bank
In this process you block the value of shares and transfer to the demat account through Delivery Instruction Slips (DIS) in order to take loans against pledged shares from respective bank. You may send email to firstname.lastname@example.org if you wish to pledge for loan.
- Pledging of shares to get higher exposure
In this process, you will get extra exposure for your trading
Important points to remember
- List of scrips available for pledging under MAS: The list of scrips available for pledging under MAS has about 850 stocks in it. This list is decided as per TradeSmart internal risk policies. It will be reviewed periodically and updated accordingly.
- Charges: There shall charges of Rs 15 for pledging and Rs 15 for unpledging + GST for per scrip request plus GST, irrespective of the quantity.
Ex: If you have pledged Reliance, ACC and SBI with any quantity on Monday, you will be charged Rs 45 (15*3) on Monday, exclusive of the GST. If you unpledge ACC and SBI on Friday then you will be charged Rs 30 (15*2) on Friday, exclusive of the GST. The pledge/unpledge charges will be debited from your ledger on the day you place the request.
- Demat account: To avail MAS facility for your account, you should have a online demat account.
- Selling Pledged shares: Pledge shares shall not be shown in holding and hence cannot sell directly without unpledging. We are working on this feature to allow soon.
- In case of any corporate action for pledged stocks the benefits of corporate action will be transferred to the demat account it is in. Hence, in case
- Dividends: In accordance with the provisions of Section 195 of the Income Tax Act, 1961, the dividends will be taxable. Since the share do not move out of demat account, the client can get the dividend directly in their primary bank account.
- Rights Issue: The rights entitlement benefit goes to the owner of the demat account where the stocks are held on the record date. In case you’d like to apply for the rights issue, you can do so without unpleding the shares. Because the shares are in your demat account only and are just marked as pledged (lien).
I have already seen the list of shares which i can pledge i have mailed and ask the question to the executive too no right answer given
1. I want to know which stocks or etf if pledge can be considered as cash equivalent or cash component.
Eg. if i pledge Liquid bees it is considered as cash component so i do not have to bring 50-50 rule does not apply for to bring cash and margin as it is considered cash itself
2. Which are the similar stocks or ETF which i can pledge and considered as cash equivalent or component
We appreciate your efforts for clarifying your queries. You can pledge LIQUIDBEES, NIFTYBEES, CPSEETF, AXISBANKETF, etc. You may find list of all EFT’s available for pledging in this link. Please enter the key word as ETF to get the list of ETF’s available for pledging. Secondly, the Exchanges accept 50% margin in cash and 50% in shares. Currently, the same criteria shall be applicable for EFT’s too. In other words, you will need to maintain 50% margin in cash and 50% in collateral for ETF’s such as LIQUIDBEES, NIFTYBEES, CPSEETF, AXISBANKETF, etc. Please refer to this link to know more on MAS.
What are the stocks that are considered as cash component i would only like to know which can be use as cash component only
Are you looking for the list of stocks which are available for pledging. If yes then please refer to this link to get the list of stocks which can be used for pledging.
Apart from RS. 60 charge for pledging… Is there any other charges
Apart from Rs.60+GST there is no any other charge for pledging as of now. In case of any charges levied by the CDSL then we shall update on our site.
What about the delivery of shares? Suppose I have 100 shares of SBI in my demat a/c and pledge all of them. And also have cash of about Rs. 10000/- . I placed and executed delivery sell (CNC) for 100 SBI shares. How shall the 100 shares be delivered to clearing house for settlement as they are already pledged? How shall I be charged? I shall be charged Rs. 60/- for pledging but, shall I also be charged for debit entry in my demat a/c?
Since when the new pledge system is started, currently we do not allow the pledged shares to sell in the open market. You are required to unpledge first from BOX back office and then you can sell. When you pledge the shares, you will be charged Rs.60. No charge for unpledging. When you sell the shares after unpledging, you would be charged Rs.15 Demat transaction charge per scrip.
Does that means that, if I have a demat a/c with some DP other than VNS, I can margin pledge the shares in it, in favor of VNS, to get the margin for intraday trading with tradesmartonline ?
Is it possible to pledge Liquidbees or Bharat Bond ETF under new pledge system.
We are working on providing Liquidbees for pledging. Hope it should be live very soon.
Please let me know once this facility is available, so that I will start using Tradesmart for my trading.
Thanks for the response.
Sure, We will update you.
It is still not clear whether the whole holding is required to be pledged or part there of ? If the pledging is necessary for margin, as per SEBI’s direction then, is it proper to charge Rs 60 per scrip, which was optional in existing system.
Its up to you whether you want to pledge the entire holdings or only the part of it. Kindly note that cash to collateral ratio is 40:60 though you pledge all the shares.
Example: Consider you have 1 lakh cash and 5 lakh holdings which has 20% haircut. Let’s assume you have pledged all the stocks. The collateral value after the haircut is Rs.4 lakh (5,00,000 – 20% of 5,00,000). As per the cash to collateral ratio of 40:60, you can utilize only 1,50,000 (1.5 times of 1 lakh available cash) out of 4 lakh collateral. In other words, for Rs.40 cash you will get Rs.60 (1.5 times of 40) collateral benefit.
In case you do not pledge the shares then you will be allowed to trade only on the available cash in your account.
There is no compulsion of pledging from SEBI.
Pledge charges of Rs.60 is charged earlier too and shall continue till further notice.