Margin Trading & Important Trading Dates
Key Definitions
First Notice Day refers to the first date where notices of intention to deliver the actual commodities against futures are authorised. This date varies by commodity and exchange. If you are holding a long futures position, you will need to liquidate or roll over the long position prior to the First Notice Date.
Cash-settled contracts do not have a First Notice Day.
Last Trading Day refers to the final day when trading can take place in a particular futures contract as determined by the Exchange. Futures contracts that remain outstanding at the end of the Last Trading Day will be settled via physical delivery of the underlying asset or cash settlement against the Final Settlement Price. For deliverable futures, all positions will have to be liquidated or rolled over prior to the Last Trading Day to avoid physical delivery.
A margin in the Futures market is the amount you would have to deposit to take up a trading position. The amount is usually a fraction of the underlying asset value, and it helps ensure that both parties fulfil their obligations. Both buyers and sellers must put up margin payments.
Trading with margin creates a leveraged effect that allows you to use a small amount of capital to make an investment of greater value. Therefore, a small price change can result in larger profits or losses.
Initial Margin is the required amount an account should have to initiate a position. Different contracts will have different prescribed initial margins.
Maintenance Margin is the minimum amount that your account must maintain after initiating your position/s. A margin call will occur when your equity falls below this maintenance margin when your position is held overnight.
Please contact 03-9212 2828 / 03-2162 1628 or email to pcsb_enquiry@phillipcapital.com.my
Generally, the equation is (Equity/ Initial Margin) x 100 = Remaining Equity in %.
This shows how much equity you have as a percentage of the Initial Margin required in your account.
Margin Call
A margin call occurs when your Equity Balance falls below the Maintenance Margin required for your overnight open positions. We determine a margin call at the end of the business day, and the margin call amount is calculated as the difference between your Equity Balance and the required Initial Margin.
Margin call amount is the difference between the equity balance and the Initial Margin. Equity balance is the sum of your cash & collateral, and the floating profit & loss determined by mark-to-market (MTM) of your open positions.
Our general policy is 1 Days. Customers are required to fully extinguish the margin call by a stipulated cut off time on Day 1.
You are to only perform risk reducing activities when on Margin call. There should not be risk increasing positions if funds are not forthcoming to fulfil the call.
To fully extinguish the margin call, you need to top up the full margin call amount. Please notify Phillip Capital Dealer with proof of transaction.
Alternatively, you can reduce your positions and to ensure that your Equity Balance is above the Initial Margin before the specific cut off time .
If your account is still in a margin deficit by the specified cut-off time, your positions will be liquidated or reduced based on the prevailing market price. Your trading access may be restricted until the statement is issued on the next business day after the margin call has been fully addressed.
Please note that all actions are carried out on a best-effort basis and at Phillip Capital’s discretion. It is important to understand that our liquidation may or may not necessarily bring your Equity Balance above the Initial Margin at the end of the business day, based on the mark-to-market (MTM) evaluation of your remaining open positions. Consequently, there may be a continuing margin call on the next business day, requiring you to top up the margin call amount based on the highest of the margin call days.
Customers are reminded to maintain sufficient margins for their positions at all times and not rely on force liquidation as a way of fulfilling margin calls.
As long as the Equity Balance is below Initial Margin at the stipulated cut off time, your account will be subjected to force liquidation to reduce the Initial Margin.
If your account is not out of call with partial top-up, you will still be subjected to forced liquidation if the equity balance remains below Initial Margin by the stipulated cut off time.
As a general guideline, you should aim to top up or liquidate your positions 30 minutes before the contract closes. However, please note that not all contracts have the same closing time.
You are reminded to maintain sufficient margins for your positions at all times and not rely on force liquidation as a way of fulfilling your margin calls.
Controlled currencies cannot be used as margin requirements on contracts which are not denominated in these controlled currencies.
You can refer to FAQ on Funds Deposit & Withdrawal for more details on how you can proceed to top-up your account.
Even though that contract is closed for trading, it is still considered as a business day if other contracts in the same exchange are opened for trading. Hence, you are required to fulfill the Margin Call by topping up your account.
If your account is in a margin deficit by the specified cut-off time, your positions will be liquidated or reduced based on the prevailing market price, solely at our discretion. Phillip Capital will not distinguish contracts that are on their Last Trading Day. If you intend to hold the contracts until expiry/cash settlement, please deposit the full margin call amount.
Please note that all actions are carried out on a best-effort basis and at Phillip Nova’s discretion. It is important to note that our liquidation may result in your account having excess equity after the contract has been cash settled.
You are reminded to maintain sufficient margins for your positions at all times and not rely on force liquidation as a way of fulfilling your margin calls.
Low Equity Policy
An account is considered to be at low equity whenever the equity balance falls below 50%* of the initial margin (IM) of the open position(s) held in the account.
Forced liquidation, on a best effort basis, can take place when the equity reaches 20% of the initial margin. While not obligated, we will do our best to notify you of the low equity status when it occurs.
*Phillip Capital reserves the right to amend the low equity and stop loss threshold in accordance with the risk profile of the account margin.
We will do our best to inform you when the account falls into low equity, and will proceed to force liquidate the position/s if equity reaches 20% of initial margin.
Informing of customers during low equity and forced liquidations are carried out on best effort basis. There may be circumstances that could hamper these actions. Customers are reminded not to rely on our force liquidation as a form of your own risk management measure.
*Phillip Capital reserves the right to amend the low equity and stop loss threshold in accordance with the risk profile of the account margin.
Force liquidation threshold is at 20% of initial margin.
To prevent any Forced Liquidation, please top-up your account or reduce your position(s) such that the remaining equity meets or exceeds the required initial margins. The account can be at low equity again if the equity continues to fall below 50% despite the earlier top up.
Weekend Risk Policy
This policy is to safeguard accounts from drastic market gaps in the next session opening.
Under this policy, customers are required to have at least 80% of IM in the equity to carry their positions over the weekends or during the relevant Exchange Holidays.
It can be maintained by either topping up the equity, or to bring down the Initial margins level by reducing your positions.
Generally, the equation is (Equity/ Initial Margin) x 100 = Remaining Equity in %.
This shows how much equity you have as a percentage of the Initial Margin required in your account.
The policy is applied on:
- Every Friday
- Eves of exchange holidays of the relevant contract.
You can refer to FAQ on Funds Deposit & Withdrawal for more details on how you can proceed to top-up your account.
Forced liquidation will be carried out on accounts below 80% to bring this percentage back to above 80%.
Forced liquidation is done at a best effort basis.
Final Notice Day/Last Notice Day
If you do not liquidate your open positions one business day before FND/LTD, you might face the risk of physical delivery.
Physically deliverable futures have to be liquidated one day prior to FND/LTD. However, there are some contracts which require earlier liquidation. This is to avoid the risk of illiquidity as contracts near expiry.
Please contact our Dealing team at 03-9212 2828 / 03-2162 1628 or Marketing team at 03-9212 2820 if you require any further clarifications on liquidating your open position to avoid physical delivery.
We encourage you to liquidate your position for your physical deliverable contract at least two days prior to FND. This is to mitigate the risk of thin liquidity. Phillip Nova will assist to liquidate all open positions that are not squared one day prior to the FND/LTD.
However, please note that the liquidation day may vary due to the nature of product, exchange requirements or holidays. Please contact our Dealing team at 03-9212 2828 / 03-2162 1628 or Marketing team at 03-9212 2820 to check on the actual liquidation day for the contract you are trading in
You are strongly encouraged to monitor your positions so that you are aware of the FND/LTD of the respective future contracts in your portfolio. You will be reminded to liquidate affected positions via email.
Failure to liquidate or roll your position(s) by the required time will result in force liquidation by Phillip Capital Sdn Bhd. This is necessary in order to prevent any physical delivery of the contract which we do not facilitate.
The liquidation by Phillip Nova will be carried out on a “best efforts” basis. In the event that we are unable to carry out the liquidation successfully, we will not be held liable to our clients for any direct or indirect losses, costs or damages of any kind arising from your position being subjected to delivery.
To avoid physical delivery
The vast majority of physical deliverable futures contracts are traded by hedgers or speculators with no interest in taking or delivering the underlying asset. Most traders simply close out the positions by purchasing offsetting contracts to avoid the risk of physical delivery.
To avoid thinning liquidity
Towards the last day of trading, physically-settled contracts will typically experience thin liquidity. This is due to the fact that traders who do not intend to convert their futures contracts to physical goods would have already exited the market either by rolling over their positions to the next delivery month or simply closing out their positions to avoid physical delivery. Naturally, such actions by traders who hold larger positions would have more significant impact on price movements and markets are therefore subject to more intense volatility as the futures contracts head towards expiration.
Forced Liquidations
Various methods can be employed for liquidations, including hedging or pricing from similar products if warranted. Slippages leading to deficits in your account may also occur during liquidations; these are risks inherent in leveraged trading, and clients are required to cover any shortfall (overlosses) that may arise.
Please do not perform any trading actions during force liquidation. If you wish to execute any trades, please inform your respective dealer representative at least 10 minutes in advance.
Can't find what you are looking for?
Should you have any query, you may contact us at 03-2783 0388 or
email us at pcsb_enquiry@phillipcapital.com.my
