What is pledging, and how does it work?

Why Pledge?

Users with limited cash margins can leverage their holdings in stocks, ETFs, and mutual funds.
This allows them to avoid missing trading opportunities on CubePlus.

Pledging Process:
Users pledge shares/ETFs, undergoing a % deduction known as a haircut.
The resultant collateral margins are available for Equity Intraday trading and futures & options writing (equity and currency F&O).

Usage and Limitations:
Collateral margins are subject to adjustment for price variations at the end of each trading day.
They cannot be used for trading commodity futures and options.

Clearing Negative Balances:
Collateral margins remain inactive until negative balances are cleared.

Calculation and Addition:
Collateral amount is calculated from the previous closing price of securities after a haircut.
This amount is added to the total margin available on CubePlus.

Cash Requirement for F&O:
Exchanges mandate that 50% of the margin for F&O positions must be in cash or cash equivalent collateral.
The remaining 50% can be in non-cash collateral margin.

Delayed Payment Charge:
If there’s a shortfall in the cash margin requirement for overnight positions and it’s funded by non-cash collateral, a delayed payment charge of 0.035% per day applies on the cash margin shortfall.