Pay later (MTF) position can be liquidated in the following scenarios:
1. Margin Call: If the value of your MTF funded position / Non cash pledge collateral value drops significantly, it may trigger a margin call, requiring you to add additional margin (funds or approved non cash collateral) to continue to maintain your position. Failure to maintain margin, to cover the shortfall, may require us to liquidate Client's position to the extent of shortfall.
Example: Let's assume you purchase 100 shares of ABC Ltd. at Rs.1000 each using Pay later (MTF) with 2x leverage. So, the amount you pay is Rs.50,000 for a position of Rs.1,00,000. Now, if the stock price drops to Rs.900, the value of your Position becomes Rs. 90,000. In this case, a shortfall of Rs.10,000 is created and your position may fall below the maintenance margin, leading to a margin call. If you fail to add the additional required margin, your position may be liquidated. Please note, liquidation will be done in multiples of the exposure given. In the said example since 2x leverage is given, the liquidation will be twice of the shortfall amount i.e Rs 10,000 * 2 = Rs. 20,000.
2. If the MTF Funded Stock has been moved out of the Exchange Approved list or the MTF Funding is done via a Stock Pledged Collateral and the Pledged Stock moves out of the Exchange Approved list of accepted Collateral, and any change in categrisation or adhoc margin as per RMS and Exchange.
3. If there is a Corporate Action Event in a Stock i.e Merger/De-Merger/SpinOff/Reduction of Capital etc.