India’s leading digital ecosystem for consumers and merchants (1) Paytm today announced that its wholly-owned subsidiary Paytm Money has launched ‘Margin Pledge’ feature. The feature will allow users to pledge their existing stocks and ETFs in return for a collateral margin that can be used for trading in stocks, ETFs, futures, and options.
Investors holding a portfolio of stocks might miss out on trading opportunities due to the unavailability of funds. To address this problem, Paytm Money has introduced the ’Margin Pledge’ feature. Margin Pledge is a process in which users can pledge their stocks to the broker in return for a collateral margin that can be utilized for trading.
To understand this with an example, let us assume an investor who holds shares worth Rs 2,00,000. Now a trading opportunity arises but due to lack of funds, the investor is unable to seize it. The user can pledge his or her existing stocks to the broker. The broker deducts a haircut of say 20% from the total value of stocks, ie Rs 40,000, and gives the remaining value of Rs 1,60,000 as a collateral margin which can be used for trading opportunities.
Paytm Money has leveraged innovative technology to simplify the process of pledging and un-pledging, reducing it to just a few clicks. The collateral is received within 30 minutes during trading hours and collateral calculation is done in real-time. Pledged stocks remain in users’ demat accounts, are eligible for all corporate actions, and can also be sold directly.
F&O and Intraday traders are amongst the major sources of revenue for Paytm Money. These traders often need leverage in order to take advantage of multiple trading opportunities. The Margin Pledge feature will make the platform more attractive to these users and allow them to increase their trading activity. A minimal charge of Rs 10 + GST per stock will be imposed on each pledge and unpledged request. The launch of the ‘Margin Pledge’ feature has the potential to increase revenues both directly and indirectly for Paytm Money.
Varun Sridhar, CEO, Paytm Money said, “At Paytm Money, we have leveraged technology to continue improving user experience and empower them with all potential opportunities. The launch of the Margin Pledge feature will allow investors to use their existing portfolio to take advantage of new trading opportunities. We have designed the feature such that users can complete the entire process within a few clicks making their trading experience seamless.”
This feature is accessible to select users and is being rolled out to more users. The feature is currently available on Android and Website and will be available on iOS soon.