SEBI permits brokers to extend margin trading facility to equity ETFs
The Hindu
Currently, only select stocks that come under Group 1 securities are offered the MTF facility by brokers.
Capital markets regulator Securities and Exchange Board of India (SEBI) has allowed brokers to extend the margin trading facility (MTF) to equity exchange traded funds (ETFs) and such funds can be used as collateral as well.
Currently, only select stocks that come under Group 1 securities are offered the MTF facility by brokers.
"Taking into account the emergence of ETFs as an investment product with various advantages such as transparency, diversification, lower cost, etc, it has been decided to allow units of equity exchange traded funds (equity ETFs)... as an eligible security for MTF as well as an eligible collateral under MTF," SEBI said in a circular.
The facility is executed with borrowed funds or securities that enable investors to take exposure in the market over and above their resources.
SEBI said that initial margin payable by the client to the stock broker should be in the form of cash, cash equivalent or equity ETFs.
Further, the stocks or units of equity ETFs deposited as collateral with the stock broker for availing collaterals and the stocks or units of equity ETFs purchased under the funded stocks should be identifiable separately and no co-mingling would be permitted for the purpose of computation of funding amount.
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