Comment on ETF - Exchange Traded Funds

N commented on 04 Aug 2014, 11:57 AM

Is it possible for Zerodha to provide margin against Liquid Bees by pledging these, but not removing them from the Demat account?

I would like to keep my idle funds in Liquid Bees and sell them AFTER trades are executed. Currently, if Liquid Bees are pledged, I understand that it takes one day to unpledge them, in which case, I will have to pay one day’s interest on the margin. Instead, if you allow margin against Liquid Bees without pledging these, the Liquid Bees can be sold on the same day after the trade is executed.

Zerodha can keep controls to ensure that there is no risk for Zerodha:
(1) Keep a control that if Liquid Bees are sold, there is no additional margin provided (since margin would already be provided prior to selling)
(2) Cancel the open trades at 3:20 pm, where margin is provided against Liquid Bees
(3) Sell Liquid Bees at 3:20 pm to cover trades, if there is a deficit at that time

This way, at the end of the day, there is no margin provided by Zerodha. This is similar to you releasing 60% margin for Futures every morning and again blocking the margin at 3:20 pm or so. Only, here, it will be 100% margin since there is no volatility risk.

Currently, my funds remain idle in a bank account. With this, the funds can earn money, as well as no hassle of transferring funds (no pay-in, pay-out everyday).

I think this will action give a competitive edge to Zerodha as well. Plus reduce your risk, as you would always have additional margin to finance any losses on open positions (since client funds would be parked in Liquid Bees instead of the bank).

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