Risk Control and Margin Call Policy Notice

 

In an effort to make sure that our traders are as knowledgeable and as responsible for their own trading as possible, we are providing this notice regarding our Risk Control and Margin Call Policy. To be clear, we define a margin call as follows:

A margin call is a notice from us to you that you are holding an open position in a product but your account balance is not sufficient to maintain this position without exceeding the exchange’s or our minimum collateral requirements.

In a margin call situation, you are either required to:

1. Deposit more funds into your account to maintain your position
2. Reduce your position so that your account is properly margined
3. Close or liquidate the position completely to move your account balance to cash

As a trader, you should know the margin requirements for the product you are trading. We generally do not take action on margin calls unless the product you are trading is approaching the close of the day (i.e. 4:00 PM CT for index products, etc.) and we are required to ensure that you have at least the initial or maintenance margin required to hold the position. If you do not have that initial or maintenance margin, you will have a margin call on your account.

For a list of products and their required margins, please visit the CME Group site linked here and filter for your product. The amount shown in maintenance margin column is the minimum per contract that you will be required to have in your account to hold a position through the close. If this is the first day you are holding the position or you have day-traded in the same product that day, you must meet the initial margin requirement instead. The initial margin requirement is 110% of the maintenance margin. For more details, please visit this page on our website.

What We Do During a Margin Call

In the situation where there is a margin call against your account, the following may take place:

1. We may attempt to contact you, on a best-effort basis, via telephone or email to warn you of the potential of a margin call. Again, we do this on a best-effort basis, but this is not guaranteed
2. If we feel that there is a significant risk to us and to yourself if you hold a position through settlement, we may put your account on “liquidate-only” and may close the position to remove the potential of a margin call
3. Note that we cannot partially close a position to bring it back in line with exchange margin requirements. If a position is not properly margined, the ENTIRE position will be closed. We will not assume responsibility of your trade by partially closing the position
4. If we are forced to close the position on your behalf, your account will be charged a broker-assisted trade fee of $50.00 per contract
5. We may notify you in writing regarding the action taken on your account including fill prices and status
6. If an account has a position that goes into settlement with insufficient margin, then the clearing firm may put a liquidate-only lock on the account automatically during the following trading session. This lock will remain in effect until the account is properly margined at the next end of day settlement. Please note that following a Margin Call Lock, your account will not automatically return to trading status. Please contact your broker to remove the lock

We do our best to not allow margin calls to remain open through the weekend. Please be advised that we will likely close your position prior to a holiday or weekend at the end of the session without notice.

Why We Do This

We hold risk control as the highest value a trader can have towards the business of trading. We expect that all of our traders will be in control of their positions and losses at all times. When a trader is not responsive to our notice or is not closing a position prior to settlement, we have to assume the worst and take appropriate steps to protect all parties involved.

Furthermore, when a trader’s account does not have sufficient margin, then the clearing firm has to put up those funds to satisfy the exchange requirements. Forcing a clearing firm to put up collateral to the exchange for a position that you are holding is not the way we wish to treat our partners and is not good business practice.

The Bottom Line

Know your margin requirements and close positions that don’t meet those requirements by the end of the session. We prefer that you are always in control.

Currency Conversions

Trading accounts generating an FX exposure are reviewed by our Risk Desk team.  Any accounts at risk for a debit due to currency fluctuations are converted periodically to avoid a potential debit in your trading account.  The clearing firm, at which your account is held, may charge a conversion fee.

If you carry a debit balance in any currency, the clearing firm may charge a monthly interest rate to your account. If you carry a credit balance in a currency where the risk-free interest rate is negative, the clearing firm may also charge a monthly interest rate on that balance. Please contact us for more information on specific charges.

Risk Rules

• Margin Call Fee:
  • Day 1 = $50
  • Day 2 = $100
  • Day 3 = $250
• Margin Liquidation Fee (Intraday and End-of-Day):
  • $50 per contract
  • $15 per contract for micros
• Auto-Liquidation Fee: $30
• Phone Orders: $50 per contract plus standard Exchange fees and commissions
• Emergency Phone Orders: $0
• All accounts who use a trading platform that supports auto-liquidation will have auto-liquidation enabled. The default setting will be to auto-liquidate the account if there is an 80% drop in the start-of-day account balance. After the auto-liquidation triggers, the account will be blocked from further trading for the rest of the day.
  • The auto-liquidation threshold can be adjusted to a smaller loss limit upon request
  •  The above auto-liquidation default setting does not apply to accounts trading on CQG or CTS
• If the Equity/Margin ratio drops below 5%, or the Net Liquidating Value (NLV) (based off the last traded market price) drops below $500 (whichever comes first), the risk desk will make an attempt to liquidate your entire position and charge a liquidation fee of $50/contract.
• If while trading micros or instruments with less than $1,000 Initial Margin, the Equity/Margin ratio drops below 5%, or the Net Liquidating Value (NLV) (based off the last traded market price) drops below $200 (whichever comes first), the risk desk will make an attempt to liquidate your entire position and charge a liquidation fee of $15/contract.
• Equity/Margin Ratio is calculated by dividing current NLV by Initial Margin (IM). An example of this calculation using the E-mini S&P (ES) can be found below.
  • Example: The IM for 1 ES contract is currently $13200
    • 5% of IM for 1 ES contract = 0.05 x $13200 = $660 per contract
    • This means that your net liquidating value needs to be $660 or higher for every 1 ES contract in your position.  $660 NLV for 1 contract; $1320 NLV for 2 contracts; $1980 NLV for 3 contracts, etc.
• If the account does not meet the initial margin (traded intraday) or maintenance margin (positions carried over from previous day) you must close your position and be within required initial or maintenance margins at least 15 minutes before the end of the current session.
• If the position is not liquidated 15 minutes before the close, the trade desk will attempt to close the entire position for you and charge up to $50.00 per contract for a broker assisted trade.
• Traders are still responsible for monitoring their positions and are financially responsible for any losses generated by open positions.
• Margin rates can be found here
• Posted margins valid up to 30 contracts. Higher position limits may require additional margin

Negative Account Balance Risk Reminder

This is a reminder that all clients accept full responsibility and risk for all trades placed in their account.  The client is solely responsible for any trading losses – including any negative account balances that may result from such losses.  For example, in the event a market experiences a large move and trading is halted, the client is responsible for all losses.