Margin pledging allows you to utilize your existing assets (stocks, ETFs, mutual funds, or bonds) as collateral to obtain additional borrowing power from your broker. This increased buying power, known as margin, can be used for trading or to initiate positions in derivative markets.

Currently at Share.Market you can pledge your stock and ETF holdings to receive margins.

Here’s a breakdown of how it works and the associated risks:

• Pledging Your Assets: You provide your eligible investments (stocks, ETFs, etc.) as collateral to your broker. The broker then evaluates these assets and assigns a haircut.

• Haircut: A haircut is a percentage deduction applied to the market value of your pledged assets. This deduction reduces the amount of margin you receive and protects the broker in case of a significant decline in your assets’ value. You can refer to this link to find out the haircut for individual securities.

• Receiving Margin: After considering the haircut, the broker releases a portion of the remaining value as a margin to your trading account. This margin can then be used for trades as per your strategy.

• Managing the Risk: The haircut ensures that the broker has a buffer in case your pledged assets lose value dramatically in situations like unfavourable market movements or unsuccessful trades. This buffer allows them to recover any outstanding margin in case your account falls into deficit.