"Securities Margin Trading" Frequently asked Questions and Answers

 

1. What is margin trading? What are the differences between cash and margin trading?

2. Can I purchase shares with cash through margin trading service?

3. Can I deposit a cheque or stocks for margin top up?

4. Will you notify me before forced liquidation takes place?

5. Is the brokerage fee for securities margin trading service and securities trading services the same?

6. If I sell the shares purchased on the same transaction date, am I required to pay the interest for this margin trading transaction?

 

"Securities Margin Trading" Frequently asked Questions and Answers

 

1. What is margin trading? What are the differences between cash and margin trading?

With margin trading, you only need to put up a fraction of the total cost when you buy shares. Because you have borrowed money to buy shares, these shares would be held as collateral. For cash trading, you must have sufficient funds in your settlement account when you place a buy order.

 

2. Can I purchase shares with cash through margin trading service?

Yes. But please note that all shares purchased through the margin trading account (whether purchased with margin lending facility or not) will be used as collateral. This means these shares may also be sold during forced liquidation should such situation occur.

 

3. Can I deposit a cheque or stocks for margin top up?

You should use cash to top up your margin account. Bank of Communications will not calculate your Loan-to-Value Ratio with uncleared cheque or unrecognized stock deposit. It is only after the cheque has been cleared and the stocks confirmed before your Loan-to-Value Ratio can be lowered.

 

4. Will you notify me before forced liquidation takes place?

No. Therefore you should be fully aware of the market situation and your account status. The Bank will force sell customer’s stock without prior notice when the Margin Loan-to-Value Ratio reaches to 120% or above.

 

5. Is the brokerage fee for securities margin trading service and securities trading services the same?

Except for interest charges, all fees for Securities Margin Trading Account and Securities Account are the same.

 

6. If I sell the shares purchased on the same transaction date, am I required to pay the interest for this margin trading transaction?

No interest will be charged for this transaction if the sale proceeds can cover the entire overdrawn amount.

 

 

The above information is for reference only. For further details, please visit any of our outlets or call our customer service hotline.

 

Risk Disclosure Statement
In relation to securities margin trading, the Customer acknowledges and fully understands that the risk of loss in financing a transaction by deposit of collateral is significant and the Customer may sustain losses in excess of the Customer's cash and any other assets deposited as collateral with the Bank. The Customer understands that market conditions may make it impossible to execute contingent orders, such as "stop-loss" or "stop-limit" orders and the Customer may be called upon at short notice to make additional margin deposits or interest payments. If the required margin deposits or interest payments are not made within the prescribed time, the Customer’s collateral may be liquidated without the Customer’s consent. Moreover, the Customer will remain liable for any resulting deficit in the Customer's account and interest charged thereon. The Customer should therefore carefully consider whether such a financing arrangement is suitable in light of the Customer's own financial position and investment objectives.

 

There is a high degree of leverage associated with margined transactions in Securities because of the small initial margin payable. High leverage can work for as well as against the Customer and can lead to large losses as well as gains. Under certain market conditions, the Customer may find it difficult or impossible to liquidate a position and therefore the losses may not be limited to the margins or Securities the Customer has paid or charged to the Bank.

 

The risk of loss in financing a transaction by deposit of collateral is significant. The Customer may sustain losses in excess of the Customer‘s cash and any other assets deposited as collateral with the Bank. Market conditions may make it impossible to execute contingent orders, such as "stop-loss" or "stop-limit" orders. The Customer may be called upon at short notice to make additional margin deposits or interest payments. If the required margin deposits or interest payments are not made within the prescribed time, the Customer‘s collateral may be liquidated without the Customer‘s consent. Moreover, the Customer will remain liable for any resulting deficit in the Customer‘s account and interest charged on the Customer‘s account. The Customer should therefore carefully consider whether such a financing arrangement is suitable in light of the Customer‘s own financial position and investment objectives.

 

In relation to communications over the internet, telephone or other electronic network, the Customer will be exposed to risks associated with the network including failure of hardware and software, delay, unauthorized interception, corruption or loss of information.