Manage margin usage ratio - Pinetree Securities

Manage margin usage ratio

Margin usage ratio (VTKKQ) = Required margin value/Valid margin asset value

Derivative account usage ratio (VTKPS) = Required margin value/Valid net asset value

Required Margin (MR) = IM + VM + DM

In there:

a) MR (Margin required): Customers must ensure and maintain the required margin value on the margin account according to regulations to trade futures contracts. MR includes the following component margin values: Initial Margin (IM), Margin to ensure the performance of Government Bond Futures Contract (DM), Variable Margin (VM).

The Client’s derivative account can only open additional positions when VTKKQ and/or VTKPS  are below the level 1 warning threshold (stated below). If this ratio falls into the level 3 warning threshold (stated below), the Customer must reduce the position through opening a new counter position to close the existing position or submit additional margin assets to the customer’s account.

b) IM (Initial margin): Initial margin according to regulations of Vietnam Securities Depository and Clearing Corporation (VSDC). Investors must pay initial margin for expected open positions before making transactions, except for reciprocal transactions of the same Derivative Account.

The Initial Margin value in a trading session is calculated based on the updated trading price in that trading session according to the following formula:

IM = IM ratio x number of contracts x transaction price x contract multiplier

The Initial Margin value at the end of the day is re-evaluated according to the following formula:

IM = IM rate x number of contracts x settlement price at the end of the day x contract multiplier

c) VM (Variable margin): Value of net loss incurred during the session (if any). In case the position profit or loss of the portfolio on the Client’s account is in a loss position, the variable margin value will be included in the MR requirement maintenance margin value.

Variable margin is determined on the basis of position profit or loss during the trading session of open positions on the investor’s Derivatives Account and the difference between: (1) Trading price updated during the trading session with (2) Final settlement price.

Determine (1) Transaction price and (2) End-of-day settlement price:

CasePrice (1)Price (2)
Open a new position during the dayLatest order matching price *Settlement price to open position
Existing position on accountMost recent matching priceDSP the previous day
Closing the position during the day
(with the position already on the account)
Settlement price for closing the positionDSP the previous day
Mở, đóng vị thế trong ngàySettlement price for closing the positionSettlement price for opening the position

* The most recent matched price does not include put-through transactions

d) DM (Delivery margin): Delivery margin, used instead of IM for derivative contracts with physical delivery to maturity..

Investors need to monitor the VTKKQ and/or VTKPSratio during the session to manage their account to ensure a safe ratio. Regulation of safety thresholds at Pinetree:

Level 1Safety levelInvestors will not be allowed to open new positions if the rate exceeds this safety level.
Level 2Warning levelWhen this level is exceeded, Pinetree will call for additional margin and customers must
pay more margin or close positions so that the ratio is lower or equal to the safe level
Level 3Executing levelProcessing level The customer’s account will be processed to partially close the position
if this level is exceeded so that the ratio is lower or equal to the safe level.

For example: On November 15, 2023, an investor opened a position to sell 10 VN30F2311 contracts at price 1120 (Short 10@1120). Investor’s margin assets ( VTKKQ ) are 250,000,000. The contract multiplier is 100,000. The margin rate according to VSD regulations is 17%

=> Initial margin (IM) = 1120 x 100,000 x 10 x 17% = 190,400,000 VND

  1. At the end of 15/11; VN30F2311 closing price is 1125, So the transaction is at a loss:

Variable margin (VM) = (1125 – 1120) x 100,000 x 10 = 5,000,000 VND
Required margin (MR) = 190,400,000 + 5,000,000 = 195,400,000 VND

=> Margin usage ratio (AR) = 195,400,000/250,000,000 < 85%, safety level according to VSD regulations.

2. At the opening of 16/11/2023, system re-caculates:

=> Initial margin (IM) = 1125 x 100,000 x 10 x 17% = 191,250,000

3. At 10:15am of 16/11, with VN30F2311 price is 1150:

Variable margin (VM) = (1155 – 1125) x 100,000 x 10 = 30,000,000
Required margin (MR) = 191,250,000 + 30,000,000 = 221,250,000

=> Margin usage ratio (AR) = 221,250,000/250,000,000 = 88.5%, warning due to > 85% according to VSD regulations.

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