In enhancing your trading experience and captures different opportunities across markets, our platform offer a one-stop service with Margin and FOREX to facilitate your trading.
For securities, the definition of margin includes three important concepts: the Margin Loan, the Margin Deposit and the Margin Requirement. The Margin Loan is the amount of money that an investor borrows from his broker to buy securities. The Margin Deposit is the amount of equity contributed by the investor toward the purchase of securities in a margin account. The Margin Requirement is the minimum amount that a customer must deposit and it is commonly expressed as a percent of the current market value. The Margin Deposit can be greater than or equal to the Margin Requirement. We can express this as an equation:
Margin Loan + Margin Deposit = Market Value of Security
Margin Deposit >= Margin Requirement
Borrowing money to purchase securities is known as "buying on margin". When an investor borrows money from his broker to buy a stock, he must open a margin account with his broker, sign a related agreement and abide by the broker's margin requirements. The loan in the account is collateralized by investor's securities and cash. If the value of the stock drops too much, the investor must deposit more cash in his account, or sell a portion of the stock.
The Federal Reserve Board and self-regulatory organizations (SROs), such as the New York Stock Exchange and FINRA, have clear rules regarding margin trading. In the United States, the Fed's Regulation T allows investors to borrow up to 50 percent of the price of the securities to be purchased on margin. The percentage of the purchase price of securities that an investor must pay for is called the initial margin. To buy securities on margin, the investor must first deposit enough cash or eligible securities with a broker to meet the initial margin requirement for that purchase.
Once an investor has started buying a stock on margin, the NYSE and FINRA require that a minimum amount of equity be maintained in the investor's margin account. These rules require investors to have at least 25% of the total market value of the securities they own in their margin account. This is called the maintenance margin. For market participants identified as pattern day traders, the maintenance margin requirement is a minimum of $25,000 (or 25% of the total market value of the securities, whichever is higher).
When the balance in the margin account falls below the maintenance requirement, the broker can issue a margin call requiring the investor to deposit more cash, or the broker can liquidate the position.
Brokers also set their own minimum margin requirements called "house requirements". Some brokers extend more lenient lending conditions than others and lending terms may also vary from one client to the other but brokers must always operate within the parameters of margin requirements set by regulators.
Not all securities can be bought on margin. Buying on margin is a double-edged sword that can translate into bigger gains or bigger losses. In volatile markets, investors who borrowed from their brokers may need to provide additional cash if the price of a stock drops too much for those who bought on margin or rallies too much for those who shorted a stock. In such cases, brokers are also allowed to liquidate a position, even without informing the investor. Real-time position monitoring is a crucial tool when buying on margin or shorting a stock.
We use real-time margining to allow you to see your trading risk at any moment of the day. Our real-time margin system applies margin requirements throughout the day to new trades and trades already on the books and enforces initial margin requirements at the end of the day, with real-time liquidation of positions instead of delayed margin calls. This system allows us to maintain our low commissions because we do not have to spread the cost of credit losses to customers in the form of higher costs.
The Account Window in Trader Workstation (demo or customer account) shows your margin requirements at any time.
COLHK uses the Reg T Margin Model.
Margin Calculation Basis | Available Products |
Rule-Based Margin System: Predefined and static calculations are applied to each position or predefined groups of positions ("strategies"). | Reg T accounts: US stocks All accounts: Forex; bonds; European, and Asian stocks |
Systems that derive risk-based margin requirements deliver adequate assessments of the risk for complex derivative portfolios under small/moderate move scenarios. Such systems are less comprehensive when considering large moves in the price of the underlying stock or future. We have enhanced the basic exchange margin models with algorithms that consider the portfolio impact of larger moves up 30% (or even higher for extremely volatile stocks). This 'Extreme Margin Model' may increase the margin requirement for portfolios with net short options positions, and is particularly sensitive to short positions in far out-of-the-money options.
If you sell a security short, you must have sufficient equity in your account to cover any fees associated with borrowing the security. If you borrow the security through us, we will borrow the security on your behalf and your account must have sufficient collateral to cover the margin requirements of the short sale. To cover administrative fees and stock borrowing fees, we must post 102% of the value of the security borrowed as collateral with the lender. In instances in which the security shorted is hard to borrow, borrowing fees charged by the lender may be so high (greater than the interest earned) that the short seller must pay additional interest for the privilege of borrowing a security. Customers may view the indicative short stock interest rates for a specific stock through the Short Stock (SLB) Availability tool located in the Tools section of their Account Management page.
Reg T Margin | ||
Initial Margin | 25% * Stock Value | |
Maintenance Margin | Same as Initial | |
Reg T End of Day Initial Margin | 50% * Stock Value | |
Cash | 100% * Stock Value |
Reg T Margin | ||
Initial Margin | 30% 3 * Stock Value | |
Maintenance Margin | 30% * Stock Value if Stock Value > $16.67 $5.00 if Stock Value < $16.67 and > $5.00 100% * Stock Value if Stock Value < $5.00 $2.50 if Stock Value <= $2.50 |
|
Reg T End of Day Initial Margin | Same as Reg T End of Day for Long Positions. | |
Cash | N/A |
Please note that not all instruments fall under these rules. Some such as Leveraged ETFs have higher requirements.
Reg T Margin | ||
IB Initial Margin | 100% * Stock Value | |
Maintenance Margin | Same as Initial. | |
Reg T End of Day Initial Margin | Same as Initial. | |
Cash | Same as Initial, Only Long Positions |
Reg T Margin | ||
Initial Margin | Margin requirements are determined by risk-based portfolio analysis models specified by each exchange. For details, visit the specific exchange site in question. | |
Maintenance Margin | Same as Initial | |
Reg T End of Day Margin | 50% 1 * Stock Value | |
Cash | 100% * Stock Value |
Reg T Margin | ||
Initial Margin | Same as Initial for long positions | |
Maintenance Margin | Same as Initial for long positions | |
Reg T End of Day Margin | Same as Reg T End of Day for long positions | |
Cash | N/A |
To trade across markets from different countries, you will need the currency that the market trades in. COL Global Access FOREX enables you to convert one currency into another easily and conveniently. With just a few clicks on the TWS, you will be able to convert your funds into the desired currency at anytime and you will be able to trade with that currency immediately.
To learn more about how to perform the currency conversion, please see our illustrative case examples below.
Link 1 Margin Facilities
Link 2 Margin Interest Rates
Mr A has a Cash Account with 200,000 HKD cash balance. Mr A wishes to purchase 25,000 USD worth of AAPL stock (Apple Inc). The current rate is 1 USD to 7.75 HKD , he can buy 25,000 USD using approximately 193,750 HKD.
In order to do so, he has to go to the TWS FXConversion tab and click on USD.HKD . The Order Entry window will now show USD.HKD with the bid/ask for the currency pair. If you choose a BUY order, you buy USD and pay in HKD and if it's a SELL order, you sell USD and receive HKD. In this situation, he wants to get 25,000 USD, so he performs the following steps:
Mr B has a Margin Account with 200,000 HKD cash balance. Mr B wishes to purchase 25,000 USD worth of AAPL stock (Apple Inc). The current rate is 1 USD to 7.75 HKD. He can buy 50,000 USD worth of stock because AAPL is a marginable stock.
He buys 200 shares of AAPL at 124 USD and it cost a total of 24,805 inclusive of all the fees. His portfolio now shows that he has a debit balance of 24,805 USD and the cash balance of 200,000 HKD. He plans on holding AAPL for at least a year and does not wish to incur the margin interest on the debit balance. So a day before the settlement, he follows the steps in Example 1 in order to close out the debit balance.
If Mr B did not do the conversion and carried the debit balance for the year as he planned-- then the margin interest accrued would amount to 658.46 USD.
Mr C has a Margin Account with 200,000 HKD cash balance. Mr C wishes to purchase 25,000 USD worth of AAPL stock (Apple Inc). The current rate is 1 USD to 7.75 HKD. He can buy 50,000 USD worth of stock because AAPL is a marginable stock.
He buys 200 shares of AAPL at 124 USD and it cost a total of 24,805 inclusive of all the fees. His portfolio now shows that he has a debit balance of 24,805 USD and the cash balance of 200,000 HKD. He plans on holding AAPL for a few days as he foresees a short term rise in price. He does not wish to convert to USD as he wishes to keep his funds in his base currency. Five (5) days after settlement, his assessment proves to be right and AAPL does indeed go up 6% and he sells it at 131.44. He gets 26,283 USD (Gross 26,285 less fees). His account now shows a credit balance of 1,478 USD and the cash balance of 200,000 HKD. The margin interest accrued for the few days will be debited during the next month, which only amounts to a total of 1.81 USD for the 5 days that the stock was held (24,805 USD * 5 days * (2.62% per annum/360 days) ) .
All figures in the examples are simplified and the examples are provided only as illustrations and are not meant to be taken as recommendations of any stock or strategy.
Terms and Conditions Risk Disclosures Client Agreement
COL Global Access is a registered trademark for the service offered by COL Securities (HK) Limited a limited liability company incorporated in Hong Kong and licensed in the regulated activity of Securities Dealing AHF149.