To take advantage of leverage, you should simply submit an application to purchase securities in an amount that exceeds the cash balance in your account. As a result of the transaction, you will have a long position in securities (“long”).
Long - Long position
At time “A” you bought shares at a price of 100 rubles. After some time, at time “B”, you sold the shares at a price of 110 rubles.
Income when purchasing only with your own funds: 10 rubles.
Income using margin lending: 60 rubles.
Buying with leverage allows you not only to increase speculative income, but also to buy securities at the right time. For example, the price of a stock has dropped sharply and has become attractive for investment. But at the moment you have less money in your account than you would like to buy shares. With the help of margin lending, you buy the security you need in the required amount, and then add funds to your account. To do this, you have a whole day, since checking the sufficiency of funds to execute settlements on the transaction is carried out the next day after the conclusion of the transaction.
As a result, you do not need to keep the full amount of money in your account waiting for an interesting price to buy a security. It is enough to provide only part of the funds, and the rest of the money is provided to you as part of the “Margin Lending” service.
In effect, the risk rate is the discount at which a security is valued under margin lending. When buying a security with “leverage” there is always a risk of a price decrease; when “shorting” there is always a risk of a price increase. The risk rate for a security takes into account the risk of unfavorable price changes and allows you to estimate the amount of risk that the Client can take on for a specific security.
Risk rates reflect:
- Market volatility in general. The more volatile the market, the higher the risk of changes in the value of the security, and therefore the higher the risk rate;
- Liquidity (volatility) of a particular security. It is known that large orders for purchase/sale have less influence on the prices of highly liquid securities than on the prices of low-liquidity ones. Consequently, the less liquid the security, the more volatile its price, and therefore the higher the risk rate for such security.
Using the initial risk rate for a security, you can calculate what maximum leverage is available to the Client when transactions with this security:
For example, the initial risk rate on a security is 50%. This means that the Client can make transactions with this security with a leverage of 1 to 1.
How are risks controlled when using leverage?
If you use margin lending, then you need to control the following:
- how the portfolio value and the size of the initial margin relate;
- how the portfolio value and the size of the minimum margin relate.
Portfolio value- this is the value of liquid assets in the portfolio on the Client’s account minus portfolio liabilities. Liquid assets include cash and liquid securities that are on the Client’s account, as well as those that may be credited to the Client’s account as a result of the execution of concluded transactions. That is, the value of the portfolio is the value of the Client’s own liquid assets in the account. Illiquid securities are not included in the calculation of portfolio value.
Initial Margin allows you to assess the risk of opening new positions. Since the Client can only risk his own assets, the initial margin should not be greater than the value of the portfolio. If the initial margin exceeds the value of the Client’s portfolio, then:
- firstly, the Client cannot open new positions aimed at increasing the margin;
- secondly, the broker sends a notification to the Client that the value of the portfolio has become less than the initial margin.
Categories of clients
* Since March 27, 2014, all clients of BKS Company LLC have been connected to the “Margin Lending” service by default. If the client disables the “Margin Lending” service, then the risk rates for all instruments for him are set at 100% - “leverage” becomes unavailable.
Margin lending tariffs
If the Client does not transfer a margin position (“short” or “long”) to the next day, but uses leverage only for intraday trading, then the “Margin Lending” service is provided FREE OF CHARGE.
When transferring a position to the next day, interest is charged according to the tariff plan. BKS Company LLC offers several types of tariffs for the Margin Lending service. The full terms of the tariff plans are contained in the Tariffs for servicing the securities market (Appendix 11 to).
Your financial advisor will help you choose the most convenient and profitable option for you.
Lists of instruments for margin lending (lists of liquid securities and currency pairs)
Risk rates are rounded and may change if the risk rates calculated by the clearing organization change.
The exact risk rates are indicated in the QUIK trading system.
Attention: The broker may exclude a security from the list of liquid securities. In this case, the value of the portfolio for the Client’s account is calculated without taking into account securities excluded from this list.
List of foreign securities for clients with a standard level of risk having the status of a qualified investor, List of foreign securities for clients with an increased level of risk having the status of a qualified investor, List of foreign securities for clients with a special level of risk having the status of a qualified investor are determined for Clients - qualified investors classified by BKS Company LLC to the appropriate category of clients (CRMS, CPUR, KOUR) in pursuance of Directive of the Central Bank of the Russian Federation dated April 18, 2014 No. 3234-U “On uniform requirements for the rules of brokerage activities when making transactions at the expense of clients" and the Agreement on transactions with incomplete coverage of the Limited Liability Company "Company Brokercreditservice" (Appendix No. 7 to the Regulations), and are not an offer to carry out transactions with financial instruments included in the specified lists, addressed to an unlimited number of persons, also to persons who are not qualified investors.
Documents of LLC "Company BKS"
- “Margin lending” - for the purposes of this material, a term that does not mean the provision of a loan or credit by the Broker to the Client, but means the provision by the Broker to its Client, subject to the necessary conditions, of the possibility of submitting and executing the Client’s instructions to carry out transactions and/or operations under the General Agreement that entail the occurrence of an uncovered or a temporarily uncovered position in securities and funds, including foreign currency, as well as the Broker’s execution of positions transfer transactions in accordance with the General Agreement, including the Regulations for the provision of services on the securities market of the Limited Liability Company “BrokerCreditService Company” (section 22.4. ), which is its integral part (hereinafter referred to as the Regulations), including the Agreement on transactions with incomplete coverage (Appendix No. 7 to the Regulations) (hereinafter referred to as the Agreement).
- Within the limits established by the Agreement.
- Leverage (the indicator depends on the type of transaction, as well as on the security) - the ratio of the value of assets that are missing to complete a certain transaction and the value of own assets that the Client has or should receive to the Client before this transaction.
- Restrictions on transactions and operations with securities, as a result of which an uncovered or temporarily uncovered position in a security may arise (“short”, “short position”).
- Restrictions may be provided for in the General Agreement with the Client. Not intended for Clients - management companies of mutual investment funds, non-state pension funds; management companies managing securities, Clients using trading and clearing accounts separate from other Clients of the broker.
- The examples are presented without taking into account the Client’s expenses for the payment of remuneration and reimbursement of expenses to the Broker, depository, trading, clearing, settlement organizations and other third parties, for the payment of taxes, and without taking into account the Client’s other expenses, including those associated with transfer/closing transactions of the Client’s positions, which reduce the Client’s income from the use of “margin lending” and the lack of money to pay for which is fully free from any obligations in the Client’s portfolio may result in the Broker making transactions to transfer/close the Client’s positions.
- If such a ratio is permissible for the relevant issue of securities in accordance with the Agreement.
- By executing positions transfer transactions in accordance with section 22.4 of the Regulations and the Agreement, subject to compliance with the conditions stipulated by them.
- As of 18.50 Moscow time, there are no temporarily uncovered positions in the Client’s portfolio in terms of settlement deadlines for transactions on the current trading day and the next trading day.
- The value of the indicator FXRatei (FXRatej) - the rate of the i-th foreign currency against the ruble (the rate of the j-th currency in which the price of the i-th security is expressed, against the ruble) - used in calculating the indicators provided for by the agreement on transactions with incomplete coverage , which is Appendix No. 7 to the regulations for the provision of services on the securities market of the limited liability company "Company Brokercreditservice", including the value of the client's portfolio, the size of the initial margin, the size of the adjusted initial margin, the size of the minimum margin, the assessment of the client's portfolio EUR, the value of the initial the risk level of the ESD client, the value of the adjusted initial risk level of the ESD client, the value of the minimum risk level of the ESD client, - is determined based on information about the latest exchange rate of the i-th (j-th) foreign currency (the price of the last transaction made at anonymous auctions) for the corresponding currency instrument “TOM”, formed during trading in the trading system of PJSC Moscow Exchange (foreign exchange market) on the current trading day. If on the specified date trading in the corresponding currency instrument in the trading system of PJSC Moscow Exchange (foreign exchange market) was not carried out, the value of the FXRatei (FXRatej) indicator is determined based on information on the latest exchange rate of the i-th (j-th) foreign currency for the corresponding currency instrument " TOM” formed on the nearest previous date of trading on such a currency instrument in the trading system of PJSC Moscow Exchange (foreign exchange market).
The value of the indicator Pi,j - the price of one i-th security - used in calculating the indicators provided for in the agreement on transactions with incomplete coverage, which is Appendix No. 7 to the regulations for the provision of services on the securities market of the limited liability company "Company BrokerCreditService", including, the value of the client’s portfolio, the size of the initial margin, the size of the adjusted initial margin, the size of the minimum margin, the assessment of the ESD client’s portfolio, the value of the initial risk level of the ESD client, the value of the adjusted initial risk level of the ESD client, the value of the minimum risk level of the ESD client is determined using information from the Russian trade organizer CJSC MICEX Stock Exchange, as well as foreign trade organizers: NYSE, NASDAQ, NYSE MKT, NYSE ARCA.
Hi all. I've been involved in several discussions lately that revolve around the financial concepts of margin and leverage, and I've discovered that when people use these words, they often mean completely different things. Having briefly looked through materials on the topic on the RuNet, it became clear that there is global confusion in understanding what margin is on the stock market and what futures margin is. Let's try to break down these basic concepts “on the shelves” - perhaps this will help you and I understand how radically different trading in shares and other stock instruments is from futures trading.
Most stock market instruments are associated with the concept of ownership. By buying a share, you become (sometimes very nominally and for a short time) the owner of part of the corporation whose shares you are trading. In other words, a share is an asset. When purchasing an asset, the full market price of that asset is paid. You can pay for the asset yourself, or with the help of a loan given to you by the broker. So, the margin in this case is precisely this very loan provided to the investor. Using such a loan, an investor can use much less of his own funds when purchasing securities (stocks, bonds, stock options, etc.). The margin creates financial leverage (leverage), which increases both profits and losses. The loan must be repaid to the broker with interest.
- Margin percentage = Market value of the stock - market value of the investor's debt divided by the market value of the stock.
- Initial margin borrowing in the US can be as high as 50%. The size of the loan can often be more than 50% of the market value of the shares, but there is a required balance that the investor must maintain in his margin account. This balance requirement will be called a maintenance margin and cannot be less than 25% of the full market value of the shares or other securities purchased.
Futures, however, are not an asset. By buying or selling futures, you do not acquire any property, you do not become the owner of anything except obligations. Please note, there are no rights, but only obligations. You do not “pay” for the futures. You place funds in your account that will enable you to trade in futures contracts for the purpose of speculation or hedging. It is this collateral that will be called margin in the futures market. It is not a loan from a broker to a trader. These are your own funds. In fact, this is a guarantee that both participants in the transaction (who are unknown to each other on the exchange) will fulfill their obligations, and the margin is provided by both sellers and buyers.
Currently, we can talk about at least three types of warranty coverage.
- Initial Margin- this is the amount that the exchange wants to see in your account on the day you open a position (on the first clearing transfer) for each futures contract you open. The initial margin is a function of the volatility of the price of the underlying asset and the size of the contract, among other factors, and can change in any direction, depending on the situation in the market for the underlying asset. The exchange usually warns about changes in its margin requirements at least 24 hours in advance.
- Maintenance margin– this is the amount that the exchange wants to see in your account for each open contract in a position whose duration extends beyond the second session (i.e. clearing transfer #2 and beyond). The maintenance margin is usually a certain percentage of the initial margin, and, of course, increases or decreases with corresponding changes in the initial margin.
The exchange “looks” at your positions once a day - during clearing, and accordingly, takes into account daily price fluctuations of the underlying asset. Considering the fact that a huge number of traders do not want to take on the risk of transferring positions through breaks/weekends, and are content with speculation within the electronic trading session, brokers providing access to exchanges offer such traders “special” conditions for trading - reduced margin, which is valid only within the trading session, and gives the trader the right to operate positions only within this session. This margin is possible only because a modern broker has the technical ability to monitor positions every second and control the risk of open positions on its part (read: liquidate particularly risky ones).
- Intraday (or “intrasession”) margin - Intraday margin- the minimum of what must be on the trader’s account to be able to have a position on the corresponding contract during the trading session. The duration of such margin is described by the broker who provides it, and the terms of such margin may vary significantly from broker to broker. Let's say, it happens that a broker requires daily security during the day - actually from 8 to 16 Chicago time, when his risk managers work. It happens that a broker generally raises the level of such margin to the exchange margin - or higher, and has the right to do this; there have been plenty of examples of this in recent times.
Thus, the concept of margin when working with stocks and futures is radically different “animals”. In one case, this is a loan from a broker to a trader to purchase an asset; in the second, it is a collateral given by the trader to enable trading.
The concept of leverage will also be described differently when we discuss the stock or derivatives markets.
In stock trading, leverage will have a direct relationship to what percentage of borrowing is used to acquire a position, and can range from 1:2 when operating in what is called a Reg T account (say, when buying $10K worth of shares you are committing 5K of your funds and borrow the remaining 5K), up to 1:6 when working in Margin Portfolio (usually portfolios from 100K).
Leverage in the futures market refers to the fact that you control a huge commodity position with a relatively small collateral deposit in your account. Leverage is built into the very nature of futures. Let us emphasize once again no part of this deposit is a loan from the broker. For example, a position of 1 contract of futures on Australian and American dollars 6A, amounting to 100,000 Australian dollars (at the current rate, $77,000), you can control intra-session with an intraday margin of $1,000, and transfer the position through clearing with an initial exchange margin of $2,420. Thus, the maximum leverage that can be achieved by a trader when using intra-session margin: 1000:77000 or 1:77, for transfer: 2420:70000 or approximately 1:32, but these are all maximum values. Suppose a trader has 10,000 collateral in his account and holds 1 6A contract open - in this situation, his effective leverage is 10,000/77,000 or 1: 7.7. The real, effective leverage that a trader uses is the ratio of the market value of the futures position and the amount of collateral cash allocated to this position. Using maximum leverage intraday almost always results in risk management liquidating the position, so you should consider the required level of intra-session margin as the absolute minimum amount of funds that should be in the account, unless your broker instructs you otherwise.
Both when trading stocks and when trading futures, the investor himself regulates the leverage used when forming a position. The more investor money is involved in buying or collateralizing a position, the less leverage it uses. High leverage allows you to build hedging positions in the underlying asset or other instruments involving the underlying asset at the lowest cost, and works to the advantage of HFT, but from the point of view of the unpretentious speculative activity of an ordinary trader, it is undoubtedly a double-edged sword. The more aggressive/higher the leverage, the greater the amplitude of possible gains and losses, the higher the potential portfolio volatility and the risks involved in speculation and investment.
To begin with, let’s talk about the very concept of “margin” and “margin trading”. Margin is usually called the difference between the initial (for example, wholesale or cost) and selling prices for goods. Securities can also be such a product: you buy shares for 100 rubles, sell for 120. 20 rubles is your margin (and profit before commissions and taxes). In professional slang, margin refers to the collateral that a trader must provide before receiving a loan from a broker.
You know for sure that Facebook shares will rise by 30-40% in a week. But you only have 10,000 rubles. You want to earn more than 3,000-4,000 rubles and borrow another 10,000 from the broker. Your forecast comes true, the shares rise by 35%. Instead of 3500 you get 7000 rubles per week. Then you return 10,000 rubles to the broker. There are 17,000 rubles in your account instead of 13,500 rubles.
It is not always profitable to borrow from a broker
You miss your forecasts and Facebook shares fall 35%. Out of 20,000, you have 12,500 left. You give the broker the 10,000 you took earlier, and in your account... 2,500 rubles.
Margin trades (trades on margin) are a risky, albeit highly profitable way to make money trading stocks. When providing a loan, the broker takes interest every day, and holding securities for a long time is unprofitable.
What does collateral have to do with it?
Margin is the percentage of your funds that you use when making transactions. These are not just your personal funds, but a guarantee - the broker will be able to take them back if the deal turns out to be unsuccessful.
Before you take out a loan for a certain amount (this can be either money or securities themselves), you must pay collateral (initial margin). The size of the initial margin depends on the amount you borrow from the broker. Typically, this is 50% of the total value of the shares you want to buy.
Are initial margin and minimum margin the same thing?
Not really. Initial margin is the amount you deposit before receiving a loan. But it is not left as a kind of cash collateral: you can use the margin, along with borrowed funds, to buy shares. The loan amount is fixed in monetary terms, the margin is fixed as a percentage of the total amount. Over time, this attitude changes.
You bought Facebook shares with an investment of RUB 20,000, of which 50% (10,000) was borrowed funds and 50% was initial margin. Over time, the share price fell by 25%. Now your shares are worth 15,000 rubles. You still owe the broker 10,000 rubles of this. This means that the leverage/margin ratio has moved against you. Your funds (5000 rubles) are exactly a third of the current market value of the shares (~33.33%). The stock continues to fall and margins are down to 25% of value. As a rule, it is at this stage that the broker offers you to top up your account and increase the margin, and if you refuse, he sells part of the shares or closes the transaction on your behalf.
Margin lending allows you to make transactions in financial markets in excess of your own funds. You are given credit leverage, that is, you get the opportunity to attract additional money or securities to conduct trading operations on the stock exchange. Leverage is provided against the assets in your account. Thus, you can buy shares or currencies for an amount significantly exceeding your own funds, or sell securities or currencies that are not among your assets. This allows you to increase the volume of transactions and increases their profitability. It must be taken into account that as the volume of funds raised increases, the risks also increase.
The key advantage of margin lending is the ability to work not only on market growth, but also on its decline, and also to take part in trading in the absence of a cash position (in this case, securities or currency in your account serve as collateral).
List of liquid financial instruments accepted as collateral
List of liquid financial instruments
In accordance with Appendix No. 11 to the Regulations, the Bank has established the following list of financial instruments recognized as sufficiently liquid, with basic risk rates.
The list does not apply to sub-accounts that record transactions performed by Clients through the Partner’s software under Cooperation Agreement No. 3017/19 dated July 18, 2019.
Issuer/instrument | View valuable paper*/ instru- cop |
Trade code | Bank's adjustment coefficient for calculating the Risk Rate used in calculating the Initial Margin, Adjusted Initial Margin and Minimum Margin | The Bank's adjustment coefficient for calculating the Risk Rate used when calculating the price of the first part of the exchange Special Repo transaction | Providing the opportunity to open an uncovered position on a security (short position) |
---|---|---|---|---|---|
PJSFC Sistema | JSC | AFKS | 1 | No | |
PJSC Aeroflot | JSC | AFLT | 1 | Yes | |
AK ALROSA (PJSC) | JSC | ALRS | 1 | Yes | |
PJSOC Bashneft | AP | BANEP | 1 | No | |
PJSC Severstal | JSC | CHMF | 1 | Yes | |
PJSC FGC UES | JSC | FEES | 1 | Yes | |
PJSC Gazprom | JSC | GAZP | 1 | Yes | |
PJSC MMC Norilsk Nickel | JSC | GMKN | 1 | Yes | |
PJSC RusHydro | JSC | HYDR | 1 | Yes | |
PJSC Inter RAO | JSC | IRAO | 1 | Yes | |
PJSC LUKOIL | JSC | LKOH | 1 | Yes | |
PJSC LSR Group | JSC | LSRG | 1 | No | |
PJSC MMK | JSC | MAGN | 1 | Yes | |
PJSC "Magnit" | JSC | MGNT | 1 | Yes | |
PJSC Moscow Exchange | JSC | MOEX | 1 | Yes | |
PJSC Mosenergo | JSC | MSNG | 1 | No | |
PJSC "MOESK" | JSC | MSRS | 1 | No | |
PJSC "Mobile TeleSystems" | JSC | MTSS | 1 | Yes | |
PJSC NLMK | JSC | NLMK | 1 | Yes | |
PJSC NOVATEK | JSC | NVTK | 1 | Yes | |
PJSC "OGK-2" | JSC | OGKB | 1 | No | |
PJSC PhosAgro | JSC | PHOR | 1 | No | |
Polymetal International plc | JSC | POLY | 1 | No | |
PJSC "Raspadskaya" | JSC | RASP | 1 | No | |
PJSC NK Rosneft | JSC | ROSN | 1 | Yes | |
PJSC Rosseti | JSC | RSTI | 1 | Yes | |
PJSC Rostelecom | JSC | RTKM | 1 | Yes | |
PJSC "Sberbank of Russia" | JSC | SBER | 1 | Yes | |
PJSC "Sberbank of Russia" | AP | SBERP | 1 | Yes | |
PJSC Gazprom Neft | JSC | SIBN | 1 | No | |
OJSC "Surgutneftegas" | JSC | SNGS | 1 | Yes | |
OJSC "Surgutneftegas" | AP | SNGSP | 1 | Yes | |
PJSC Polyus | JSC | PLZL | 1 | Yes | |
Mechel PJSC | JSC | MTLR | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU24019RMFS0 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26205RMFS3 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26207RMFS9 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26209RMFS5 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26210RMFS3 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26211RMFS1 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26212RMFS9 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26214RMFS5 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26215RMFS2 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26217RMFS8 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26218RMFS6 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26219RMFS4 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26220RMFS2 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26221RMFS0 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26222RMFS8 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU26226RMFS9 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU29006RMFS | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU29011RMFS2 | 1 | No | |
Ministry of Finance of the Russian Federation | OFZ | SU29012RMFS0 | 1 | No | |
JSC | TATN | 1 | Yes | ||
PJSC Tatneft named after. V.D.Shashina | AP | TATNP | 1 | No | |
PJSC TMK | JSC | TRMK | 1 | No | |
PJSC AK Transneft | AP | TRNFP | 1 | Yes | |
PJSC Unipro | JSC | UPRO | 1 | No | |
PJSC Bank VTB | JSC | VTBR | 1 | Yes | |
Yandex N.V. | JSC | YNDX | 1 | No | |
VTB Bank (PJSC) B-1-10 | Bonds | RU000A0ZZYR2 | 1,5 | No |
|
VTB Bank (PJSC) B-1-13 | Bonds | RU000A100089 | 1,5 | No |
|
VTB Bank (PJSC) B-1-3 | Bonds | RU000A0ZYKG7 | 1,5 | No |
|
Bank VTB PJSC B-1-8 | Bonds | RU000A0ZZH84 | 2 | No |
|
BPIF VTB Corporate Bonds (VTBB ETF) | share | RU000A1002S8 | 1 | No | |
EUR (euro) | currency | EUR | 1.2 | Yes | |
USD (US dollar) | currency | USD | 1.2 | Yes | |
Ministry of Finance of the Russian Federation | E/O | XS0114288789 | 2.5 | 1 | No |
Ministry of Finance of the Russian Federation | E/O | XS0088543193 | 4.2 | 2 | No |
Web Finance plc |
E/O | XS0993162683 | 1 | 1 | No |
GAZ CAPITAL S.A. | E/O | XS0191754729 | 2 | 1 | No |
Polyus Finance Plc | E/O | XS0922301717 | 2.8 | 1 | No |
Web Finance plc | E/O | XS0524610812 | 1.5 | 1 | No |
Web Finance plc | E/O | XS0559915961 | 1 | 1 | No |
Web Finance plc | E/O | XS0800817073 | 1 | 1 | No |
Ministry of Finance of the Russian Federation | E/O | RU000A0JWHA4 | 4.2 | 2 | No |
Ministry of Finance of the Russian Federation | E/O | RU000A0JXU14 | 3.4 | 1 | No |
Alfa Bond Issuance PLC | E/O | XS0620695204 | 2.1 | 1 | No |
GAZ CAPITAL S.A. | E/O | XS0316524130 | 2 | 1 | No |
GAZ CAPITAL S.A. | E/O | XS0885733153 | 3.2 | 1 | No |
GPN Capital S.A. | E/O | XS0830192711 | 2 | 1 | No |
GPN Capital S.A. | E/O | XS0997544860 | 2 | 1 | No |
MMC Finance DAC | E/O | XS1298447019 | 2 | 1 | No |
MMC Finance DAC | E/O | XS1589324075 | 2 | 1 | No |
Novatek Finance DAC | E/O | XS0864383723 | 2 | 1 | No |
VTB Eurasia DAC | E/O | XS0810596832 | 2.6 | 1 | No |
Ministry of Finance of the Russian Federation | E/O | RU000A0JXTS9 | 4.2 | 2 | No |
Ministry of Finance of the Russian Federation | E/O | RU000A0ZYYN4 | 4.2 | 2 | No |
Ministry of Finance of the Russian Federation | E/O | XS0504954347 | 4.2 | 2 | No |
Ministry of Finance of the Russian Federation | E/O | XS0767472458 | 4.2 | 2 | No |
Ministry of Finance of the Russian Federation | E/O | XS0767473852 | 3.5 | 1 | No |
Ministry of Finance of the Russian Federation | E/O | XS0971721450 | 4.2 | 2 | No |
Ministry of Finance of the Russian Federation | E/O | XS0971721963 | 3.5 | 1 | No |
Rosneft International Finance Limited | E/O | XS0861981180 | 2 | 1 | No |
Evraz Group S.A. | E/O | XS1405775377 | 2 | 1 | No |
GPB Eurobond Finance PLC | E/O | XS0848137708 | 4 | 1 | No |
* JSC - ordinary shares, AP - preferred shares, OFZ - Federal loan bond, E/O - Eurobonds.
To calculate the Initial Margin, Adjusted Initial Margin and Minimum Margin, the Risk Rates published by the Non-Bank Credit Organization - the central counterparty "National Clearing Center" (Joint Stock Company) (hereinafter referred to as NCC) for each financial instrument, multiplied by the Bank's Adjustment Ratio corresponding to each security, are applied.
Risk rates for each security are published by NCC on its website https://www.nationalclearingcentre.ru/ in the section Risk management / Stock market / Risk parameters for shares.
Risk rates for each currency are published by NCC on its website in the section / Risk management / Foreign exchange market and precious metals market / Risk parameters. https://www.nationalclearingcentre.ru/catalog/030702.
Also, current information on changes in risk rates can be published by NCC in the “News” section (https://www.nationalclearingcentre.ru/catalog/0701).
For financial instruments for which NCC has not published risk rates, the risk rate is 100%.
For sub-accounts that account for transactions carried out by Clients through the Partner’s software under Cooperation Agreement No. 3017/19 dated July 18, 2019, a risk rate of 100% is applied for all financial instruments.
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Terms of service at VTB Bank (PJSC)
- Margin lending is provided under a brokerage service agreement. To obtain credit leverage, you do not have to fill out any additional documents. After concluding an agreement for brokerage services, additional resources are attracted automatically, immediately at the time of the transaction. You only need to monitor the market situation and marginal indicators, as well as quickly respond to price changes.
- During one trading session, margin lending is free of charge. When transferring a position to the next day, the commission is charged only for the margin resources actually used.
- The size of the attracted margin funds does not require prior approval from the bank and is limited only by the size of the leverage, which depends on the category of the client and on the financial instruments in the client’s portfolio. Limits on transactions with securities and the withdrawal limit are reflected in the Personal Account, as well as in online trading systems.
What is the KPUR status “high-risk client” and how to obtain it
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For the purposes of margin lending in accordance with the Directive of the Bank of Russia dated October 8, 2018 N 4928-U “On the requirements for brokerage activities when a broker carries out individual transactions with securities and enters into agreements that are derivative financial instruments, the liquidity criteria for securities provided as ensuring the client’s obligations to the broker, when the broker carries out such transactions and enters into such agreements, as well as the mandatory standards of the broker performing such transactions and concluding such agreements.” All individual clients of the Bank are divided into 2 categories: KPUR (client with an increased level of risk) and CRMS (customer with standard risk level). For the category of clients classified as CISD, the risk rates on securities are lower and, accordingly, the margin leverage is higher.
All Clients – individuals are by default classified as CRMS. To be classified as a CPSD, you must meet one of the following criteria:
- 1) The amount of cash and the market value of securities in your own portfolio must be at least 3 million rubles*; or
- 2) You simultaneously used the brokerage services of VTB Bank (PJSC) or another broker on the securities market for at least 6 months, during which 5 days you made transactions in securities or forward transactions, as well as the amount of funds and the value of securities in your own the portfolio must be at least 600,000 rubles*.
- 3) You brought a statement from another broker stating that by this broker you were classified as a CPUR.
If, after being assigned to the KPUR category, you no longer meet the requirements for assigning clients to this category, then your status still does not change
When a client is assigned to the CPUR category, the client receives a corresponding notification to the email address specified in the questionnaire.
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- You can make margin transactions both by phone and via the Internet. Online trading systems Online Broker and QUIK, as well as your Personal Account, allow you to track the status of your portfolio, calculate margin indicators and the amount of possible borrowed funds before making a transaction. In addition, the system shows the number of securities that you can buy or sell without violating acceptable margin requirements.
How to calculate margins
How to calculate marginal indicators (asset adequacy indicators)
The rules for calculating margin indicators are contained in the Bank of Russia Instructions dated October 8, 2018 N 4928-U “On the requirements for brokerage activities when a broker carries out individual transactions with securities and enters into contracts that are derivative financial instruments, liquidity criteria for securities provided as collateral obligations of the client to the broker, when the broker carries out such transactions and concludes such agreements, as well as on the mandatory standards of the broker performing such transactions and concluding such agreements" and in the Rules for calculating the margin level (Appendix 11) to the "Regulations for the provision of services in financial markets" - see section
Margin lending involves increased risk. To control the size of possible losses, the bank sets margin indicators and makes sure that the share of your own funds in the portfolio does not fall below the established values.
To determine the maximum leverage for a client's position, 3 indicators will be calculated: portfolio value, initial margin and adjusted initial margin level. Adjusted Initial Margin Level calculates the initial margin taking into account all orders submitted by the client and the order currently submitted. The portfolio value indicators and the adjusted initial margin level are calculated as of days T0, T1, T2 based on the balances of cash and securities on these days.
The portfolio value is calculated using the following formula:
A-L, Where
A - client assets;
L - client's debt.
The initial margin is calculated using the following formula:
Initial margin = (Security Bank 1 *Dn 1 (long/short) + Securities Bank 2 *Dn 2 (long/short)+…+Security Bank n *Dn n (long/short))*FXRate j,m, Where
Securities i - the cost of the i-th securities in the client’s portfolio. If a short position on a security is opened, then their modulo value is taken.
Dн i (long) - discount rate for a security if the client has a long position on it;
Dн i (short) - discount rate for a security if the client has a short position on it;
FXRate j,m – exchange rate of the j-th currency to the main currency (ruble);
The minimum margin is calculated as half of the initial margin.
Risk coverage standard when executing client orders:
NPR1 = Portfolio Value - Initial Margin
Risk coverage standard for changes in portfolio value:
NPR2 = Portfolio value - Minimum margin
The valuation of securities for calculating both indicators is carried out based on the last transaction on the exchange.
Discount rates for a particular security for purposes of determining initial margin are calculated using different formulas depending on the categories of clients.
CRMS | KPUR | |
Dн long = 1 - (1-r) 2 | Dн long = r | |
Dн short = (1+r) 2 - 1 | Dн short = r |
r is the risk rate determined by the exchange for a specific security.
Please note that risk rates are changeable parameters and are calculated by the Non-Bank Credit Organization - the central counterparty "National Clearing Center" (Joint Stock Company) (hereinafter referred to as NCC) every trading day.
At the same time, the Bank has the right to set its own adjustment coefficients that increase NCC’s risk rates.
Risk rates for each security are published by the clearing organization National Clearing Center on its website https://www.nationalclearingcentre.ru/ in the Risk Management section.
Also, current information on changes in risk rates can be published by NCC in the “News” section (https://www.nationalclearingcentre.ru/catalog/0701)
It is prohibited to conclude a transaction or withdraw funds/securities if, as a result of these actions, the NPR1 is reduced by at least one of the days T0, T1, T2.
Example
Two clients, one of which belongs to the CISD category, the other to the CRMS category, have funds in their portfolio in the amount of 1 million rubles.
The KPUR client, using the margin lending service, purchases 50,000 ordinary shares of Gazprom at 100 rubles per share, the KRUR client – 27,777 shares. We will take the risk rate for calculations for Gazprom shares as 0.2.
CRMS | KPUR | |
Own funds | 1 000 000 | 1 000 000 |
Borrowed funds | 27 777 * 100 – 1 000 000 = 1 777 700 | 50 000 * 100 – 1 000 000 = 4 000 000 |
Portfolio value | 27 777 * 100 – 1 777 700 = 1 000 000 | 50 000 * 100 – 4 000 000 = 1 000 000 |
r | 0.2 | 0.2 |
Dн long | Dн long = 1 - (1-r) 2 = 0.36 | 0.2 |
Initial Margin | 27 777 * 100*0.36 = 999 972 | 50 000 * 100*0.2 = 1 000 000 |
Leverage size (ratio of equity to borrowed funds) | 1: 1,7777 | 1: 4 |
Minimum Margin | 999 972 / 2 = 499 986 | 1 000 000 / 2 = 500 000 |
NPR1 | 1 000 000 – 999 972 = 28 | 1 000 000 – 1 000 000 = 0 |
NPR2 | 1 000 000 – 499 986 = 500 014 | 1 000 000 – 500 000 = 500 000 |
UDS | 500 014 / (999 972 - 499 986) = 1 | 500 000 / (1 000 000 - 500 000) = 1 |
Clients used the maximum possible leverage on the security with the lowest risk rate. When you purchase other securities into your portfolio, your leverage will only decrease. Clients are no longer allowed to make margin transactions or withdraw funds on margin until NPR1 becomes greater than 0.
The amount of leverage will depend on what securities are in the client’s portfolio, since different discounts are used for different securities to calculate the initial margin.
When a client submits any application (including for the withdrawal of funds or securities), the “adjusted risk coverage standard” indicator will be calculated for the client. This indicator calculates the risk coverage standard taking into account all applications submitted by the client and the application currently being submitted. If this indicator falls below 0, the application will be rejected. In the application form submitted through the online trading system, the client will see the calculation of the limit for the purchase/sale of securities depending on the set price.
Withdrawal of funds into margin is possible until the maximum leverage NPR1>0 (UDS>1) is reached.
<0) брокер закроет часть позиций клиента до уровня НПР1>0 (UDS>1).
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- The transfer of a long margin position secured by federal loan bonds (OFZ) to the date of payment of the coupon income by the issuer is carried out in such a way that settlements for the delivery of OFZ under the second part of the Special Repo transaction occur after the end of trading on the day of concluding such a Special Repo transaction and, therefore, clients who opened such margin positions will be included in the list of persons entitled to receive coupon income from the issuer.
- According to the requirements of the Central Bank, in a falling market the broker has no right make a margin transaction to sell securities at a price that:
- 5 percent or more below the previous day's closing price;
- below the last current price;
- below the last trade price.
1.View margin requirements through your Personal Account
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Indicators calculated for your securities portfolio in accordance with the new margin trading rules can be viewed in your Personal Account. To enter it, in the form of entering your login and password, indicate them from your “Service in Financial Markets” card.
Access to your Personal Account is provided via the link https://lk.olb.ru.
Portfolio for days T0, T1, T2, TX – The value of assets in the client’s portfolio on days T0, T1, T2, TX minus debt;
Money (current) for days T0, T1, T2, TX – funds in the account, taking into account transactions concluded in the current trading session;
Initial margin per day T+X:
Adjusted margin for days T0, T1, T2, TX
Minimum margin for day TX
NPR1
NPR1 = Portfolio value - Initial margin;
NPR2
Accor. NPR1
– Adjusted risk coverage standard:
NPR1 = Portfolio Value - Adjusted Margin;
Withdrawal of funds into margin is possible until the maximum leverage NPR1>0 (UDS>1) is reached.
If NPR2 decreases below 0 (UDS<0) брокер закроет часть позиций клиента до уровня НПР1>0 (UDS>1).
Available on days T0, T1, T2, TX – the value of the client’s portfolio minus the adjusted margin (cash available for withdrawal);
Shorts
Longs
Money (incoming) for days T0, T1, T2, TX – funds in the account at the beginning of the trading day;
Requirement for day T2 – the minimum allowable amount of money by which it is necessary to replenish the trading account in order to avoid forced closure of positions.
Requirement = ABS([Portfolio] – [Minimum Margin]);
If Requirement<= 0, значение требования окрашивается красным;
If Requirement > 0 and Requirement = 0, no red coloring is performed.
Inbox (lot) – assets at the beginning of the corresponding trading day;
Current (lot) – assets in lots for the corresponding trading day, taking into account concluded transactions;
Buy/Sell Limits – limits on the purchase/sale of securities at bid/ask prices, taking into account submitted but not executed orders ( taking into account the provision of margin leverage);
Position cost for days T0, T1, T2, TX – assessment of each position on securities in monetary terms;
N/real.
– current income on unrealized securities in the portfolio (the weighted average purchase price for the portfolio is considered as the purchase price);
Implementation – income received on sold securities in the portfolio (the weighted average purchase price for the portfolio is considered as the purchase price);
Total – total value N/real. And Implementation
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2. Reflection of information about margin limits in the QUIK trading system.
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Updating the program version.
For the Quik system to work correctly with the new margin lending model, you must update the program to the latest version. If the “Update program version” option is selected in the “Program” section of the “Client Place Settings” window, then the update will be offered automatically when connecting to the server:
Click the button "Accept files", after finishing the reception, confirm the reinstallation of the program with the button "Yes".
If the program does not offer automatic updates, you can launch it from the menu “Communication\Updating the program version”:
Setting up the “Client Portfolio” window.
After updating the program, you can make window settings "Client Portfolio" adding indicators to control the margin position:
Minimum Margin – discounted (at discounts other than the discounts used to calculate the initial margin) valuation of securities in the client’s portfolio;
Initial Margin : – discounted valuation of securities in the client’s portfolio;
Adjusted Margin – Adjusted initial margin level for days T0, T1, T2, TX i.e. initial margin taking into account all submitted but unexecuted orders and the order currently being submitted;
NPR1
– Risk coverage standard when executing client orders:
NPR1 = Portfolio value - Initial margin;
NPR2
– Risk coverage standard for changes in portfolio value:
NPR2 = Portfolio value - Minimum margin
Clients do not have the right to make margin transactions or withdraw funds to margin until NPR1 becomes greater than 0.
Withdrawal of funds into margin is possible until the maximum leverage NPR1>0 (UDS>1) is reached.
If NPR2 decreases below 0 (UDS<0) брокер закроет часть позиций клиента до уровня НПР1>0 (UDS>1).
Portfolio value – assessment of the client’s own funds based on current positions and prices.
FAS (funds adequacy level) for the day
UDS = NPR2/(Initial margin – Minimum margin).
Shorts
– the amount of evaluation of short positions at the current quote in monetary terms (quantity*lot size*last transaction price);
Longs – the amount of valuation of long positions at the current quote in monetary terms (quantity*lot size*last transaction price);
To open the settings window, right-click in the client portfolio and select the context menu item "Edit table":
Look for the required parameters in the column "Available options" and add them to "Selected Options" double-click the left mouse button or press a button "Add".
For more information about the purpose of parameters and portfolio settings, see the built-in help for the Quik program.
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- VTB Bank (PJSC) carries out margin lending in strict accordance with regulatory documents, guaranteeing the protection of your rights and interests when conducting margin transactions.
- Directive of the Bank of Russia dated October 8, 2018 N 4928-U “On the requirements for the implementation of brokerage activities when a broker carries out individual transactions with securities and enters into agreements that are derivative financial instruments, the liquidity criteria for securities provided as security for the client’s obligations to the broker, when the broker performing such transactions and concluding such agreements, as well as the mandatory standards of the broker performing such transactions and concluding such agreements" Next
List of regulatory documents on margin lending
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What is "Initial Margin"
Initial margin is the percentage of the purchase price of securities (which may be purchased on margin) that an investor must pay with his own cash or income securities; it is also called the initial margin requirement. According to the Federal Reserve Board's Rule T, initial margin is currently 50%, but this level is a minimum and some brokers require you to put in more than 50%. For futures contracts, the initial margin requirements are set by the exchange.
BREAKING DOWN "Initial margin"
A margin account allows investors to use leverage and buy more securities than the cash balance in their account would allow. A margin account is essentially a loan account in which interest is charged on the outstanding margin balance. Securities purchased in a margin account are purchased using funds transferred to the investor by the broker, and the securities themselves are used as collateral. This allows for potential increases in profits, but also losses. In the extreme event that securities purchased on margin go to zero, the investor will be required to contribute the full original cash price of the securities to cover the loss.Initial Margin Requirements and Example
To use a margin account, an investor must post a certain amount of cash, securities or other collateral, known as the initial margin requirement. In most cases, for equity securities, the initial margin requirement is 50%. For example, let's say an investor wants to buy 10,000 shares of Company X, valued at $10 per share. The total value of the cash balance account will be $100,000. If an investor opens a margin account and sets aside an initial margin requirement of $50,000, then they have total purchasing power of $100,000. This is how leverage is created in this case the reward amount is from two to one.
For futures contracts, exchanges set initial margin requirements, but this is often 5% or 10% of the contract being exchanged. For example, if an oil futures contract is worth $100,000, an investor can enter into this position by posting only an initial margin of $5,000. This initial margin requirement will give the investor a 20 percent leverage ratio. During periods of high market volatility, exchanges may increase initial margin requirements to any level they deem appropriate, and brokers may elect to increase initial margin levels above those required by law.
Initial margin requirements are not the same as maintenance margin requirements, which may also be increased or decreased depending on market volatility.