Tiered Margining
Our new system of Tiered Margining on share CFDs enables us to offer lower margins on more than 4650 global shares, with many margin rates cut by half. 900 of our headline shares are included in the reduction.
Over 650 shares, across the world’s major indices, are now available at margin rates starting from just 5%.
As a result of this change, the margins on less than 10% of our shares have increased.
What is Tiered Margining?
Tiered Margining enables us to set margin rates that reflect and best fit the size of your aggregate position* in a particular share. This means that the majority of positions will attract our lowest margin rates, reflecting the liquidity of the market at smaller deal sizes. The largest positions may require a higher margin, as it is more difficult to trade out of these positions quickly.
How does it work?
Your initial margin will be determined using a table of four incremental tiers. The margin rate will increase progressively as your aggregate position moves up from one tier to the next. However, only the portion of your position that falls into a higher tier will be subject to its increased margin rate.
The range of the four tiers differs to suit each market, and the margin rate varies according to the type of account you hold.
Example: Tiered Margining for HSBC Shares
The table below shows how Tiered Margining applies to HSBC shares.
| Tier 1 | Tier 2 | Tier 3 | Tier 4 | |
|---|---|---|---|---|
| Position size (shares) | Up to 150,000 | 150,001-900,000 | 900,001-30,000,000 | 30,000,000+ |
| Margin rate (Trader Account) | 5% | 20% | 40% | 90% |
| Margin rate (Select Account) | 5% | 10% | 25% | 90% |
As a Trader or Select account holder, if you hold a CFD position of 50,000 HSBC shares, your initial margin will be 5%.
If you are a Trader Account holder with a 200,000 HSBC position, your initial margin will be determined as follows:
- 150,000 at 5% (Tier 1)
- 50,000 at 20% (Tier 2)
This equates to a weighted average margin rate of 8.75% – still lower than our old margin rate of 10% and, although you will not own the shares, significantly lower than the outlay required for an equivalent share purchase in the underlying market.
Reducing your margin requirement
For a small number of clients the margin requirements from 24 October will be higher, due to the increased margins on some shares, or the effect of Tiered Margining on larger positions. If affected, you may wish to consider reducing the size of some of your positions, or alternatively place additional funds on your account to ensure cover for any increased margin requirements.
You can also lower your margin by using non-guaranteed stops, as long as your aggregate position falls exclusively within the range of the first tier. Please note, however, that any Tier 1 margin reductions will be lost if you increase your aggregate position beyond the threshold of Tier 2.
So, if you have 130,000 shares of HSBC and a tight non-guaranteed stop, but decide to add another 30,000 shares to your position, you may see a substantial increase in your margin requirement
More information
A full list of affected shares and their applicable deposit tiers can be found below.
The Tiered Margin requirements for each share can be seen on the PureDeal platform. Simply use the Get Info option on the drop-down menu for the market concerned.
Remember that the size of your overall position, and not the level of the initial margin, dictates your profit and loss. It is possible for losses to exceed your initial margin.
* For the purposes of Tiered Margining, your aggregate position includes your non-Controlled Risk open positions and orders to open.