Margin Call Rules

Below is a detailed introduction and example regarding margin calls.

A margin call occurs when your account equity falls below the maintenance margin (MM) requirement. If this happens, you must address the margin call within 3 trading days upon receiving the margin call notice (including the date of receipt).

The amount specified in the issued margin call notice will be slightly higher than the difference between the MM and the equity value, to provide a buffer for price fluctuations.

Example of a margin call:

A client deposits SGD 10,000 in cash and SGD 5,000 worth of Stock A (initial margin (IM): 30%, MM: 25%), and purchases SGD 25,000 worth of Stock B (IM: 50%, MM: 45%). Assume that the market value of Stock B falls to SGD 19,500.

After the client buys the stocks and the value of Stock B decreases, the client's holdings are as follows:

The client needs to ensure that the equity in their account meets the margin requirement on or before the specified date.

If the client chooses to sell stocks, the minimum market value that needs to be sold is equal to the margin call amount divided by the IM ratio.

If the equity falls below the forced liquidation margin, the client must immediately cover the margin shortfall; otherwise, their positions may be forcibly liquidated.

Note: If you need any explanation or help with the margin trading mechanism, please contact customer service.

Key takeaways:

• Triggering condition: The value of equity falls below the MM level.
• Margin call amount: The margin call amount is generally higher than the difference between the MM and equity.
• Processing deadline: You must make up the shortfall or reduce your positions within 3 trading days upon receiving the notice.

Disclosures

This article is for reference only and does not constitute any investment advice.