FAQ Margin Requirements
They are derivatives products. They use leverage, which means that with a small guarantee (margin requirement) you can open much bigger positions, which you could otherwise do with your own account value. Cornèrtrader offers as derivatives CFDs (all types), Listed and OTC FX Options and Futures. Single equities, Bonds and Mutual Funds are not derivative products but are normally called cash products, as to open a position you would need to pay the entire nominal value of the transaction.
The initial margin requirement is the one that is needed to open a position. Once the order is executed and the position is opened, the margin will be calculated on the maintenance margin instead, which is normally lower than the initial.
The tiered margin is a way of calculating the margins on CFDs and Forex by using the concept of net exposure bands. A specific margin requirement percentage is associated to each band, which tends to be lower for small exposures and increases gradually for the bigger ones.
The margin rates of each instruments can be found under their trading conditions in the platform. In the trade ticket you can see, instead, the calculation of the margin required for a position before you insert the order.
The tiered margin is used to calculate the margin requirements on Forex and CFDs tracking equities, ETFs and indexes. For each underlying, the requirements are given by the rating associated to a given equity and index, while it considers the liquidity of a cross in case of Forex.
The rating determines the risk category of an instrument. It goes from 1 to 6, where 1 represents the category with less risk and 6 the one with the highest risk. Therefore, equities and indexes on 1 will have the lowest margin requirement (and highest collateral requirement for equities), which increases (and decreases for collateral on equities) at each next rating level. Rating 6 has the worst margin or collateral requirements, set to 100% of the value of the underlying.
The rerating of equities or indexes is the change of their risk category and, therefore of their rating. They are reviewed periodically, usually once per week on Mondays or when there are important market events or factors, which might affect a single instrument.
The rerating can result in a change to a higher or lower rating. While the latter is beneficial for your margin requirement, the move to a higher rating can increase your margin (or decrease your collateral) requirements. If this happens, it might be necessary to deposit more liquidity in the account or reduce the exposure to avoid stop outs.
It is a change of the margin requirements consequently to re-ratings or to other events, including increased volatility, as a result of which there will be the need to reassess the requirements of certain products. This praxis is performed to mitigate the risk for the bank and the clients in adverse conditions.
The periodic upcoming margin changes are visible under Account > Others > Upcoming margin and collateral changes. Extraordinary changes might be notified via email or phone, depending on the urgency or the specific situation. We try our best to inform our clients with proper time. But, there can be, situations in which the change must be done within a very short period of time, leaving little if no time to take any actions.
When you use margin products, you are opening positions, which are bigger, then your real deposit. Your losses and profits will be calculated on the total value of your positions and not on your margin requirements. In fact, you are using a sort of credit to invest and the margin is a form of guarantee you need to block into the account, in order to keep the position opened. The review of the margins is, therefore, performed to mitigate at our best the risk for the clients and the bank on certain positions, in case of market adverse situations, increased volatility, and a single or extraordinary event.
Margin and collateral requirements are decided and periodic reviewed by the Risk Management of our broker. For this reason, it is not possible to request different ones. Cornèrtrader can also not interfere with the broker’ Risk Management decisions.
You can check the utilized margin of all your open margin positions in the margin utilization section in the platform. It is represented as a bar showing a percentage that goes from 0% to 100% (from green to red). The more it increases and moves from green to red, less collateral is available into the account to maintain your positions.
The margin call is the step before the stop out, which indicates that the account is getting to the level of having no longer sufficient collateral to maintain the open positions.
The stop out is the level at which all your margin positions, included long options, will be liquidated automatically, as there is no more sufficient collateral in your account.
No, once the margin call starts, the execution of all new orders will be rejected, as there is no sufficient collateral to increase your exposure further. You will only be able to reduce. Be aware, however, that if you have multiple positions netted via FIFO (first in and first out) on an underlying, it can become very difficult if not impossible to reduce your exposure. In fact, some orders to close could imply an increase of the exposure, instead, and, therefore, the system would reject them.
The margin calls and stop outs are notified through the app myCornèr, via push notifications, and in the platform when you are logged in. If you don’t have your access to the myCornèr app any more or have forgotten your password, please contact us for the reactivation.
If your account goes in margin call, you can either deposit more collateral in your account or reduce your exposure. However, there might not always be sufficient time to take actions as prices can move very fast and, from the margin call to the stop out, it might pass very little time. If you decide to send more funds, please note that we can book them only if we have successfully received them from your counterparty. A mere confirmation or a swift message cannot be used for the purpose.
The level at which stop out orders are automatically placed is when you reach 100% of your margin requirements. This, however, does not mean that your positions will be closed at exactly 100%. Stop out orders are, in fact, normal stop outs, which are converted into market orders and executed at the available price. For this reason, your positions may be closed well beyond the 100% limit and, in some cases (such as gaps), your account may go negative. It is therefore recommended that you keep sufficient collateral in your account and reduce your exposure at any time if necessary.