Find the Broker with Cheapest MTF Rates

MTF stands for Margin Trading Facility. A product that has the approval of SEBI(Security Exchange Board Of India). It permits the trade in the stock market with borrowed money.

Therefore Broker with Cheapest MTF Rates are the suitable options for traders. To get a complete understanding of MTF read the article carefully.

What is MTF?

A small percentage of capital will go to the broker. And the remaining capital is given back by the broker to investors. Also, the interest rates apply to the amount that the investor borrows. Interest rate is important in Margin Trading Facility.

MTF Interest Rates

Interest rates on the borrowed funds for the execution of margin trades are known as the margin interest rates. Every broker has a different rate. And the rates also change as per the rules and regulations and market conditions. Interest rates will be high when brokers borrow money from third-party money lenders.

Significance of Low MTF Interest Rates

Low MTF interest rates are helpful for investors. Because low interest rates help investors make a profit. Because borrowing costs will be less. A broker has a significant impact on the trader’s net income.

Use of MTF

MTF is helpful for the traders. It helps the traders in the following factors :

1. Increases Capital: With MTF investors can trade in expensive stocks. Just with the help of a small part of the capital. And allow the investor to make profits. It works well for traders having low capital.

2. Swing Trading: Its best use case is in swing trading. Here the investor has to make quick investment decisions. The step is simple: just borrow the amount with the help of MTF. And make the best use of it by making profits.

3. Diversification: The trader must diversify their investment portfolio. With MTF investment can be done even if the investor is not capable. Also increases the performance.

List of Brokers with Low MTF Interest Rates

Broker	Interest Rate Per Annum (PA)	Interest Rate Per Day
HDFC Securities	12%	0.03%
Alice Blue	18%	0.05%
Dhan	16%	0.043%
Motilal Oswal	20%	0.055%
5 Paisa	18%	0.05%
ICICI Direct	20.49%	0.056%
Kotak Securities	9.75%	0.026%
IDBI Bank	22%	0.06%

MTF Example

Let's say Radhika has Rs 2000 in the Demat account. And the per-share price is 1500. Assume stock can qualify 3 times. Therefore Radhika can buy 3 shares of 1500.

Let me know how it's possible :

Total Amount of 3 Shares: Rs 1500* 3 = Rs 4500.
Margin Amount: Rs 2000
Amount Funded By Broker: Rs 4500 - Rs 2000 = Rs 2500

Therefore the broker will give Rs 2500. The charge will be 0.04% per day on the amount that is funded.

Interest Calculation :

Now if Radhika sells the stock after holding the position for 10 days then the funded amount i.e. Rs 2500 interest calculator will be done in the following manner.

Interest On Daily Trading: Rs 2500 * 0.04% = Rs 1
For 10 days: Rs 1 * 10 = Rs 10

Rs 10 will be the interest rate that Radhika will pay for holding the 3 shares.

Also, Check - Types of Stock Brokers in Share Market

Things to be known before selecting the Broker

The investor has to be very careful while selecting the broker. Investors need to consider the following factors :

1. Margin Requirements: If the margin is low borrowing cost will be low.

2. Reputation: It is necessary to check the track record of brokers.

3. Extra Services: Also check the customer support that the broker offers. And the trading platforms.

4. Transparency: Brokers must show the MTF interest rates to traders.

Conclusion

The selection criteria are simple. Look for the Broker with the Cheapest MTF Rates. The lower the interest rate higher the profit. But the profit changes as per the investment decisions. Investors should have a clear idea about the investments. Whether to invest in the short term or to invest in the long term. If the investor is looking for quicker returns then go with brokers having lower daily interest rates. And for the long term pick the broker with a low MTF interest rate per annum. Therefore in this way, the investor can choose the broker.