uTrade AlgosMargin Trading Facility (MTF) and pledging of shares are two different ways to enhance your trading capacity, but they serve different purposes and function differently.
- MTF is a facility where you borrow money from the broker to buy stocks. The shares you buy are automatically pledged to the broker as collateral for the borrowed funds. It gives you direct funding to take leveraged positions.
- Pledging, on the other hand, is when you use the shares you already own as collateral to get additional margin or a trading limit. You’re not borrowing to buy those shares—you’re leveraging existing holdings for broader trading flexibility. It is commonly used for derivatives trading or to support MTF/F&O margins.
Comparison Chart: MTF vs Pledging
| Feature | Margin Trading Facility (MTF) | Pledging of Shares (Margin/Collateral Pledge) |
| Purpose | To buy stocks using borrowed funds | To increase the trading limit using existing shares |
| Shares Involved | Shares purchased under MTF | Shares already held in your Demat account |
| Collateral | Purchased shares are pledged to the broker | Existing shares are pledged voluntarily |
| Funding | Direct loan from a broker to buy shares | No direct funding; margin is provided when shares are pledged |
| Interest | Interest is charged on the borrowed amount | No interest unless the margin is used for leveraged positions |
| Leverage | Direct leverage via borrowed capital | Indirect leverage via increased margin |
| Pledging | Mandatory (under MTF arrangement) | Optional (based on strategy) |
| Holding Period | May have a holding period; interest accrues until the position is closed | Shares remain in your account but are locked until unpledged |
For any questions or assistance, feel free to reach out to Share India’s support team at support@shareindia.com or call us at 18002030303.