Question

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What is the difference between the margin required by anexchange from one ofits members...

What is the difference between the margin required by an exchange from one of
its members for a future contract and the margin required by a broker from one of
its clients?

Solutions

Expert Solution

The following are the differences between the Margin required by exchange and Margin required by the broker :

Margin required by Exchange from member

Margin required by Broker from client

This is the initial amount of deposit that the trading members are required to deposit with the exchange.

This is the deposit that the trader or client is required to deposit with the broker in order to open a trading account

This margin is regulated by Fed and SEC or SEBI and are fixed for all the trading members

The margin amount is determined by individual broker based on the exposure of a specific client.

Margin is required in the form of deposit in members account with the Clearing Banks

Margin is required to be deposited in the trading account of the broker by accepted means of payments

Margin requirement is calculated at the time of settlement by the clearing house

Margin requirement Is calculated real time based on the risk / volatility of the traded asset

Margin call is placed only at time of settlement

Margin Call can be placed at any time in real trading hours failing which securities can be liquidated

Margin required from TM for Exchange based settlement of securities

This margin is required for trading / margin trading or short selling of the securities

jeff jeffy answered 2 years ago
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