SFC: Margin requirements may change along with market conditions

21 Nov 2011

In the latest issue of InvestEd Intelligence, the Securities and Futures Commission (SFC) reminds those who borrow to trade securities and futures to stay on top of their margin requirements to maintain their margin positions, especially in times of high volatility.

The SFC points out that margin requirements can be changed in response to fluctuating market conditions. This means that some brokerages may tighten the margin requirements without prior notice, such as raising the minimum level of margin deposits or excluding certain securities as accepted collateral. Investors who fail to fulfil such requirements on time may be subject to forced liquidation and suffer significant loss.

“Margin trading involves significantly higher risks than cash trading,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “Before signing up for a margin loan, investors should make an honest assessment of whether they can afford the risks involved, and read the client agreement to fully understand their rights and responsibilities.”

Penning this issue’s “Sounding Board” column, Mr Alder reiterates that investors must seek to be informed to participate in the securities and futures markets.

“To protect small investors, we strive to make proprietary information available to the public and share insights we have gained from our regulatory work with them,” Mr Alder said. “On their part, investors must access all relevant information to make informed investment decisions.”

This issue’s “Regulatory Update” column helps investors understand the finer points of the new investor protection measures regarding synthetic ETFs, which are directed at mitigating uncollateralised counterparty risks and enhancing the transparency of collateral assets.

The public are invited to use the “IE Activities Planner” to plan their participation in upcoming investor education activities. These include a series of interviews aired on Metro Finance from now until January 2012 that features celebrities sharing their investment experience, as well as a number of updated articles posted on the InvestEd site to explain how investment-linked assurance schemes work and what to note in a takeover.

InvestEd Intelligence is a bimonthly newsletter for investors, which provides a diverse range of educational information about investing. Topical market issues, product development information and regulatory updates are among topics to be covered regularly. The newsletter is published at the SFC’s InvestEd site on the 20th day of every odd month, or the business day after, if the 20th falls on a Saturday or a public holiday.


1. News media are welcome to reproduce materials in InvestEd Intelligence upon acknowledging the source of the information.

Page last updated : 1 Aug 2012