Our margining system is set up such that with a high degree of certainty, every counterparty posts sufficient margin to cover potential losses from sudden price swings.
We achieve this through independent margin accounts for each instrument type. The total portfolio value of each margin account is continuously estimated and compared to the margin requirement arising from the open positions and open orders in that margin account.
The following sections describe how portfolio value and margin requirements are calculated and what happens if portfolio value falls short of margin requirements.
The Instant Margining System (IMS) uses two different margin parameters to manage the credit risk of margin accounts. Each parameter is associated with a certain margin requirement per open long or short position and triggers certain action when reached:
|INITIAL MARGIN (IM)||This is the margin that is required to open new positions. If the portfolio value of a margin account falls below IM, all open orders that would further add to the risk of this margin account are cancelled immediately. Before any new positions can be opened, additional funds must be deposited into the margin account to bring portfolio value back above IM. Alternatively, some existing positions can be closed out.|
|MAINTENANCE MARGIN (MM)||This is the margin that is required to maintain open positions. If the portfolio value of a margin account falls below MM, then the liquidation procedure begins.|