What is the currency margin?
This article explains the currency margin mechanism of Longbridge Securities for currency borrowing trades.
If you use currency borrowing trades (such as holding Hong Kong dollars to buy US stocks), due to the risk of exchange rate fluctuations, Longbridge will charge a certain percentage of currency margin.
Example:
When you deposit HKD 20,000 and purchase US stocks with a market value of USD 2,000, the US stock market value subsequently falls to USD 1,900. Although the overall net asset value of the account is approximately HKD 19,220 (calculated at an exchange rate of 7.8), the US dollar is insolvent and a currency margin of USD 4 will be charged for each USD 100.
The currency margin is counted in buying power, withdrawals, and margin calls.
| HKD Balance | HKD 20,000 |
| USD Balance | USD -2,000 |
Market value of holdings | USD 1,900 |
| Net worth of HKD asset | HKD 20,000 |
| Net worth of USD asset | USD -100 |
| Currency Margin | USD 100 * 0.04 = USD 4 |
The following are the currency margin ratios for two currencies:
| Currency | Currency Margin |
| USD | 4% |
| HKD | 4% |
Key takeaways:
- Triggering condition: Liabilities appear in the net asset worth of the borrowing currency.
- Calculation rules:
- Margin = Liability amount × 4% (USD/HKD flat rate)
- Included in buying power, withdrawals, and margin call checks
Disclosure
This article is for reference only and does not constitute any investment advice.
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