Instantly sell pledged cash equivalent securities

Pledged cash-equivalent securities such as Liquid ETFs, Sovereign Gold Bonds, and Government Bonds can now be sold instantly without waiting to unpledge them.

Previously, if you wanted to sell pledged cash-equivalent securities, you had to place an unpledge request on Console before 3:30 PM. These securities would only become available for selling the next day. This one-day delay not only caused inconvenience but also affected F&O traders who use these securities for managing margins and meeting mark-to-market (MTM) requirements.

What are cash equivalent securities?

Instead of holding cash in their accounts, many traders prefer to invest in low-volatility securities such as Liquid ETFs, G-Secs, and similar instruments and pledge them for margin to trade in the F&O segment. Since these securities are less volatile compared to stocks, the collateral margin from pledging these securities is treated as equivalent to cash.

This approach allows traders to manage their funds efficiently and also allows them to meet the minimum cash margin requirements set by exchanges for F&O positions. Exchanges mandate that 50% of the margin for F&O positions must be in cash or cash-equivalent collateral, while the remaining 50% can be in non-cash collateral.

For instance, if you hold an F&O position with a margin requirement of ₹1 lakh, you need to maintain ₹50,000 (50%) in cash or cash-equivalent collateral, with the other ₹50,000 in non-cash collateral.

How to instantly sell pledged securities?

You can sell pledged securities instantly by placing a sell order as you normally would. The pledged quantity is displayed separately with a “P” symbol in Kite holdings, alongside any quantity that is not pledged.

When you sell pledged securities, the collateral margin provided against those will be reduced from your account. Once the order is executed, you will receive 100% of the sale proceeds, just like any sale of free holdings. These funds can then be used for purchasing other securities, trading F&O, or any other purpose.

Did you know?

• When a sale trade is executed on a holding that has both pledged and free quantity, the pledged quantity is reduced first, followed by the free quantity. However, at the end of the day, any sale obligation will be fulfilled first with the free quantity. To learn more, see Why is the collateral margin reduced when the holdings are sold?
• If you buy back the pledged quantities that you sold on the same day, the pledged quantity will be reinstated, and the collateral margin will be immediately added back to your account.