Currency Margin Calculation

Overview:

The following provides an example of how currency margins are calculated.

Margin for Trading Example

Assume base currency is USD for the below example

  1. Determine the base-currency equivalent of net liq values in the account

      Net Liq USD Equivalent
    EUR: -14,362.69 -19,712.723
    KRW: 6,692,613.37 5032.04
    USD: 15,073.07 15,073.07

    Using exchange rates as follows

    EUR USD 0.72860

    KRW USD 1330.00000

  2. Determine the haircut rates for each currency pair

    HairCut Rates:

    USD EUR .025
    USD KRW .10
    EUR KRW .10
  3. Determine the largest negative currency balance

  4. Sort the haircut rates from smallest to largest

    EUR USD 0.025
    EUR KRW 0.10
  5. Starting with the positive net liq base-currency equivalent with the lowest haircut rate, calculate the margin requirement on that portion which may be used to off-set the negative net liq value.

    Consume 15,073.07 USD equivalent against the EUR

    Margin1 = (15,073.07) x 0.025 = 376.82

  6. Repeat step (5) until all negative net liq values have been covered

    Remaining negative net liq

    -19,712.723 + 15,073.07 = -4,639.65

    Consume remaining negative net liq with 4,639.65 USD equivalent of KRW

    Margin2 = (4,639.65) x 0.10 = 463.97

    Remaining negative net liq

    -4,639.65 + 4,639.65 = 0.00

Total margin requirement = Margin1 + Margin2 = 376.82 + 463.97 = 840.79