Trade without leverage
To disable leverage on your account, visit ‘Settings’ in the Client’s Area.
Keep in mind that non-margin accounts are not allowed to engage in:
- Options and futures trading
- Stock and fund shorting
Alternatively, you can open a back-up sub-account to trade these instruments with leverage.
Note! Trading without a margin means you can no longer borrow any amounts from the broker to place your orders. However, you will still see the margin utilization rate changing in your account - as it counts the amount of cash traded from your account.
All the positions will be opened with 1:1 leverage rate. For example:
Account value: 10,000 USD
Value of purchased stocks: 5,000 USD = Margin Delta: 5,000 USD
Margin Utilization rate: 50%.
Note that trading without margin still means that you can have negative positions in currencies. That may happen if you trade an instrument in a currency that is not available for your account. To avoid interest charges, make sure you timely convert your currencies or enable automatic conversion from your Client’s Area.
What is a concentration rate?
Concentration Rate indicates the rate of penalty applied for the concentration of certain positions. A Concentration Rate of 50% implies that if a position exceeds 50% of the total Account Value, that position is then considered Concentrated and the percent of funds blocked for the margin will increase to Concentration Rate value.
Leverage Rate Long is 20%,
Concentration Rate Long is 75%.
A client with Account Value of 10,000 USD opens position worth 12,000 USD. The position value x 75% is below his Account Value, therefore Leverage Rate of 20% applies and 2,400 USD is blocked as margin (12,000*20%).
A client with Account Value of 10,000 USD opens 25,000 USD position in RDS.B.NYSE. The position in RDS.B.NYSE x Concentration Rate Long is higher than Account Value (25,000x75%=18,750>10,000), therefore Leverage Rate of 75% applies and 18,750 USD are blocked as margin for this exact position.
Other positions will follow the same logic separately, total margin will be the sum of individual margins (normal or penalized, depending on each individual position size and penalty rate).
Concentration Rates apply to the majority of Forex and stock/ETFs instruments. Concentration rates are also set for some futures and options underlyings. Leverage Rates as well as Concentration Rates are set by the Risk department on a case by case basis and can be changed at any time.
You can always check the Concentration rate in the ‘Instrument Info’ module on your desktop platform.
Concentration margin is a global setting and cannot be deactivated for specific accounts.
What is a margin call?
Margin call is the term used to describe a situation when the value of an account (total deposits plus or minus any profits/losses) falls below margin requirements.
Margin call is initiated once Margin Utilization reaches 100%. In this situation, clients won’t be able to open new positions, yet they will still keep the existing positions as long as risk management system allows.
You can always check your Margin Utilization level on your EXANTE account using:
- Client’s Area 'Account Summary' for your account
- EXANTE trading platform from Web, desktop and mobile versions for both Live and Demo accounts
Should the margin utilization exceed 100%, the client will be in breach of margin requirements and EXANTE will have the right to decrease or fully liquidate the client’s open positions at any moment. The client will be informed about a Margin Call by an email in his registered email address.
It is the client’s responsibility to keep enough funds to fully cover margin requirements of open positions.
Margin call can be covered by:
- sending additional funds (cash or marginable securities)
- reducing position
In case you still want to hold open positions for a while providing an additional deposit, you would need to contact firstname.lastname@example.org providing the SWIFT confirmation of the transfer.
Same applies for a delayed reduction of open positions. In case you need additional time to close a position, contact email@example.com to receive a confirmation. Otherwise the open positions will be closed manually from the side of EXANTE with a fee of 90 EUR.
What is margin utilization?
Margin utilization is the percentage of margin collateral that a client uses for buying on margin. If the margin utilization exceeds 100%, there is a risk that margin positions will be stopped out (i.e. reduced or liquidated) and a margin call will be initiated.
Margin Utilization is calculated as = (100 * Used for margin) / (Account value + Other collateral – Not available as margin collateral).
Account Value (AV) = 29,968.80 (Total Cash Balances or 7,552.38 + Total Trades Value or 22,416.41)
Total funds Used for Margin are 7038.92
MU% = 23% (7,038.92 / 29,968.80)
EXANTE applies 2 types of leverage rates for the instruments:
- Standard leverage rate indicates the percentage of the asset value that is blocked as margin. Thus, a 30% Leverage Rate blocks 30% of the value of the asset as Used for Margin in the account.
- Concentration Rate indicates when the penalty rate for the concentration of certain position will be applied and the penalty itself. Concentration Rate of 50% means that if position in a single asset exceeds 50% of the total account value, that position is then considered concentrated and the percent of funds blocked for margin will increase to Concentration Rate value. More information on Concentration Rate can be obtained here.
Margin report is a module in the EXANTE trading platform that allows you to track not only the total sum and proportion of leverage, but also the entire structure of the current margin, depending on traded assets. In order to access the module, open EXANTE desktop platform > click 'Margin Report' on your top toolbar.
What is cross-margining?
Cross margining is the process of offsetting positions whereby excess margin from one instrument is transferred to another instrument to satisfy margin maintenance requirements. When cross-margining — you use an instrument you already own as collateral to acquire a new asset. Even if the new asset is of another type, thus increasing liquidity and financial flexibility.
Cross-margining is an automatic function, enabled to all EXANTE trading accounts.
With our all-in-one account structure, you will not need to open separate accounts to trade different types of assets. EXANTE allows you to invest in bonds or stocks to obtain leverage for buying different types of instruments, for example, futures or options.
What is a margin requirement?
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.
What is buying on margin ?
Buying on margin is the purchase of an asset by using leverage and borrowing the balance from a bank or broker.
When buying on margin you can invest in more assets than you’d be able with your funds alone. This way, you can diversify your portfolio and increase potential revenue from short-term investments. Keep in mind that higher revenue is accompanied with additional risk.
EXANTE provides you with a margin trading account by default. You can trade FX currencies, liquid stocks and bonds with leverage. As stock exchange margin requirements apply to futures, they are not subject to leverage. No leverage is also provided for funds.
If a contract is traded at a specific exchange, EXANTE charges margin as set by the respective exchange. EXANTE also reserves the right to charge above or below exchange margin for certain contracts, depending on market conditions.
You can always check leverage for the instrument in the ‘Instrument Info’ module of your desktop platform.
If you are eager to change the leverage rate of a particular instrument, please contact your Account Manager.
Standard EXANTE leverage rate starts from 20% for stocks and 5% for currencies.
Detailed information on leverage rates for any given instrument can be found on EXANTE desktop app.
- Right-click on the chosen instrument in the list of Instruments
- Choose 'Instrument Info'
Individual stock exchange margin requirements are applied to futures and leverage is not applicable to them. The same refers to options and funds.
You can turn off margin trading in your Client's area module Settings.
It is possible to contact your account manager with additional questions, such as the change of the leverage rate on the instrument of interest.
Avoid a Margin Call
Effective money management considerably decreases probability to receive Margin call. We recommend:
- Diversifying your portfolio.
- Using margin at the low end of borrowing limit.
- Trade low-risk instruments.
- Calculate margin utilization before setting your order (check Margin Delta in your platform).
- Monitor account daily and thus be ready if market situation changes quickly. For most effective Margin monitoring use Desktop platform module ‘Margin Report’.
- You might also consider that one of the best ways to avoid margin calls is not to use leverage at all. Turn off margin trading in your Client’s area.