Paytm subsidiary Paytm Money has rolled out a ‘Margin Pledge’ feature to help users access new trading opportunities by leveraging existing portfolios.
This feature allows users to pledge their stocks in return for a collateral margin and can then be used for trading in stocks, ETFs, futures and options.
The feature that is currently accessible to select users is available on Android and web versions and will be on Apple iOS soon.
“We have designed the feature such that users can complete the entire process within a few clicks making their trading experience seamless,” Paytm Money CEO Varun Sridhar said in a statement.
WHAT IS MARGIN PLEDGE
Margin Pledge is a process wherein users can pledge their stocks and shares to the broker in return for collateral margin which can then be utilised for trading. This collateral margin can be utilised for trading in stocks, ETFs, futures and options.
WHAT HAPPENS IF I PLEDGE MY SHARES
Pledged shares and stocks will remain in the user’s Demat account throughout the duration of the pledge and are eligible for all corporate actions. Charges on pledging and increased transactions from the feature could lead to higher revenues directly and indirectly from Paytm Money, the statement said.
HOW TO PLEDGE SHARES AND STOCKS ON PAYTM MONEY
Users can pledge and un-pledge shares and stocks on Paytm Money in a few clicks. The collateral is received within 30 minutes during trading hours and it is calculated in real-time. A minimal charge of Rs 10+ GST per stock will be imposed on each pledge and unpledge request.
But how does one pledge shares and stocks on the app? For example, an investor who holds Rs 2 lakh but he is unable to seize an investment opportunity due to lack of funds. In this case, he/she can pledge their existing stocks to the broker. The broker then deducts a haircut of 20 per cent from the total value of stocks (Rs 40,000) and gives the remaining value (Rs 1.6 lakh) as collateral margin which can be utilised for trading.
WHY MARGIN PLEDGE IS IMPORTANT
Margin Pledge feature will make the platform more useful for F&O and intraday traders, one of the major sources of revenue for Paytm Money. These traders need leverage in order to encash multiple trading opportunities.
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