Margin Trading Facility, PMS and Research Services

Brokers offer several value-added services beyond plain execution: Margin Trading Facility (MTF) — leverage for delivery trades; Portfolio Management Services (...

Definition

MTF + PMS + Research

Brokers offer several value-added services beyond plain execution: Margin Trading Facility (MTF) — leverage for delivery trades; Portfolio Management Services (PMS) — personalised wealth management; Research Services — stock reports, recommendations. Each has distinct SEBI eligibility and net-worth requirements.

In Simple Words

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MTF: corporate brokers with minimum net worth of ₹3 Cr (as per SEBI) can offer margin-trading facility — client pays part (usually 25-50%), broker funds rest; position can be held for days/weeks with daily interest (12-18% p.a. typical). Requires SEBI registration + dedicated systems. PMS: personalised portfolio managed by a SEBI-registered Portfolio Manager with minimum net worth ₹5 Cr; minimum client investment ₹50 Lakh. PMS offers discretionary (PM decides), non-discretionary (PM advises), advisory (client decides). Research Services: brokers must separate research from trading conflicts; research reports carry full disclosure of positions, conflicts, target prices.

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MTF = Delivery Leverage

Broker funds the delta; client pays interest

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PMS = Bespoke

₹50L+ minimum; portfolio manager runs the show

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Research

Must disclose conflicts + positions

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Net Worth Gates

₹3 Cr MTF / ₹5 Cr PMS / ₹10 Cr AIF

Real-Life Scenario

A Practical Example

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Ravi

Real-Life Scenario

Ravi wants to hold 100 RIL (₹2,40,000) for 2 months but has only ₹60,000 cash:

• MTF Buy: Zerodha funds ₹1,80,000 against his 100 RIL pledged as collateral. Interest ~18% p.a. = ₹2,700/month

• After 2 months, if RIL ₹2,600: Ravi gains ₹20,000 − ₹5,400 interest = ₹14,600 net (24% return on his ₹60,000 outlay)

• If RIL falls to ₹2,300: Ravi loses ₹10,000 + ₹5,400 interest, plus potential margin call if MTM drops below maintenance level

Key Points to Remember

What Makes This Important

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MTF: corporate brokers with ≥ ₹3 Cr net worth

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Client pays 25-50% upfront; broker funds rest

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MTF interest: 12-18% p.a. typical

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PMS: min net worth ₹5 Cr; min client investment ₹50 Lakh

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PMS types: Discretionary / Non-Discretionary / Advisory

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Research analysts registered with SEBI; conflict disclosure mandatory

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Brokers offering all these services need separate registrations

FAQs

Frequently Asked Questions

No. Only stocks in the SEBI-approved MTF list are eligible (typically large-caps with good liquidity). The exchange updates the list periodically. Stocks under ban period or with low liquidity are excluded.

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