Current system

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

In case you have already pledged your shares with us for margin, you will need to move to the new system before 28th August 2020. Failing which you shall not be given the pledge benefit after 28th August 2020.

Any new pledge requests after 28th August 2020 will have to be through the new system of pledging only. Since this is the new system, there may be delays from our side to process new pledge requests received after 28th August 2020. We request you to please bear with us.

Process to place pledge request in the new system

  1. Login to BOX
  2. At the left side, click on Margin Against Shares > Pledge > Pledge Shares
  3. In Pledge More section, enter the quantity to be pledge
  4. Click on Pledge Button at the right bottom corner.

After we receive your request, we shall upload your request to the CDSL. Once we upload the request, below are the important steps to be carried out by you.

  1. You shall receive an email/SMS from CDSL containing an URL 
  2. Click on the link and enter your PAN and other required details
  3. Select the stocks you wish to give for pledging and generate OTP
  4. An OTP will be sent to the registered email/mobile and shall be valid for only 15 mins
  5. 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.

The shares pledged in the old system can be unpledged just by selling the stocks in the open market which shall be allowed till 27th August 2020. Alternatively, you may also visit BOX back office to unpledge the shares before 27th August 2020.

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.

POA (Power of Attorney) is Mandatory for Pledge

Pledge request from BOX, will be accepted only if you have submitted a POA physical copy.

Also please note:

  1. We will be closing the existing pledge system from 28th August 2020. You are required to place the pledge request with the new system there after
  2. You shall not be allowed to sell the pledged shares. We are working on adding this feature soon
  3. 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
  4. The pledge charge is Rs 15 and the unpledge charge is Rs 15
  5. Please update your email and mobile number to be able to get the OTP from CDSL
  6. Non-authenticated margin pledge transactions will be ‘Cancelled’ at the end of request date

Comments

  1. muhammad naseem ansary (yukm14)

    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.

    1. Trade Smart Online Article Author

      Hello Muhammad,
      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.

    1. Trade Smart Online Article Author

      Hello Jegadish,
      We are working on providing Liquidbees for pledging. Hope it should be live very soon.

      1. Jagadish A p

        Please let me know once this facility is available, so that I will start using Tradesmart for my trading.
        Thanks for the response.

    1. Trade Smart Online Article Author

      Hello Kavita,
      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.

      1. Sushanta Sarkar

        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?

        1. Trade Smart Online Article Author

          Hello Sushanta,
          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.

          1. Sushanta Sarkar

            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 ?

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