“MTF is booming, but here’s the catch: many traders track the interest rate and ignore brokerage. Brokerage on MTF can add up faster than you think,” Kamath wrote on X, adding that leverage magnifies not just returns but also costs.
MTF allows investors to buy stocks by paying only a portion of the total value upfront, with the broker funding the remaining amount. Investors pay interest on the borrowed portion for as long as the position is held. In a rising market, this can amplify gains. But in volatile or sideways conditions, leverage can also magnify losses.
Kamath’s argument is that many traders focus only on the daily interest rate charged on the funded portion, while underestimating brokerage, which is charged on both buy and sell legs. In shorter holding periods, especially where price moves are small, brokerage can meaningfully impact the net outcome.
“MTF is a leveraged product, so you are already taking significant risk,” he said. “If you don’t pay attention to costs while using leverage, the math gets worse because your breakeven point moves higher for the trade.”
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Every cost — interest, brokerage, taxes and other charges — pushes up the price at which a trader must exit just to break even. In a non-leveraged trade, these costs are relatively modest compared to the total capital deployed. In an MTF position, however, the investor’s own capital is smaller, meaning costs form a larger percentage of invested equity.Kamath pointed out that this becomes particularly relevant for short-term traders aiming to capture marginal price movements. “On shorter holding periods and smaller price moves, brokerage can be the difference between breakeven and a loss,” he said.
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