The margin requirement is the minimum amount of assets a client must hold on the balance before buying on margin.
On the EXANTE desktop platform, you can check margin requirements for each instrument by right-clicking on an instrument in the list of ‘Instruments’ > choosing ‘Instrument Info’.
For many instruments, our clients can use both cash and securities to satisfy the margin requirement.
To calculate specific requirements, we use an in-house risk management system, a variation of SPAN. It examines an amount of scenarios with the worst possible loss your portfolio can suffer over a specified time span.
The model uses a set of parameters including:
- The quality of your portfolio
- The risks associated with a chosen asset in the current market conditions
The obtained margin requirement indicates how much value a portfolio may lose in a worst-case scenario. For setting margin discounts, EXANTE uses the intercommodity spread credit between correlating underlyings.
Important note: In case of a black swan event, margin concentration penalty applies. Meaning that if your portfolio becomes concentrated (measured by stressing exposure with extreme market conditions) leverage rate of your positions slowly changes from normal to reduced. For derivatives positions it implies a multiplication of standard margin by some factor up to the scale where margin requirement will be equal to the potential losses under stressed market conditions.