• Margins


    Trading deposits (margins) are required upon initiation of a futures trade. Further deposits may be required daily to reflect the changes in the price of the contracts, when the market moves against a trader's position. If additional funds are required to restore the original margin (ranging from 5%-10% of the contract's nominal value) then variation margins must be paid in unless adequate security, for example treasury bills, had already been deposited when the account was established. Conversely, if the futures price move is favourable to the trader, the gains transferred into the account above the margin requirement level become immediately available to the trader.

    Clearing house members must maintain specific margins depending upon their net open position with the clearing house. Margins are also needed for members of the trading public who lodge their contracts with members of the exchange. Original margins are normally set at approximately 10% of the market value of a contract and variation margins must be paid in full upon demand. Margin money collected by the exchange member from the public must be deposited in segregated customers' accounts. Note that the original margin requirements in this category are minimum figures and that exchange members may require additional security from their clients if they feel the minimum margin is not enough.

    Original and variation margins are adjusted from time to time for the following reasons: to reflect increased or decreased market levels; to add security to volatile positions, particularly in months carrying no limit; and to discourage excessive concentration of trading positions in any one month. Investors should note that margin requirements can be changed without prior notice.

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