What is a Margin Call?

Margin call is after the daily trading of the futures exchange, the brokerage company must also settle the futures transactions performed by the client on the day, calculate the profit and loss of the client's transaction, adjust the margin account, and cooperate with the clearing house to integrate the "liability-free settlement system". It has been implemented to every trader, so that customers can also achieve debt-free transactions. According to the profit and loss of the client, the brokerage company adjusts the client's margin account, and the other party loses money. When the margin account is less than 50% of the original margin amount, the client issues additional margin to the client. The amount paid as a result of the loss. At the same time, it is necessary to guarantee the performance of the contract on behalf of the client and cope with possible price risks. This is actually equivalent to the broker company lending money to the client for futures trading, which will also affect the broker company in the unfavorable market. Therefore, in order to ensure the safe operation of the brokerage company and protect the interests of the brokerage company, when the client commissions the transaction, the brokerage company generally has to sign an "Account Opening Agreement" with the client. When additional margin is issued and the client does not respond, the brokerage company has the right to hedge and close the futures contract held by the client. After closing the position, the commission that the client should pay to the brokerage company is deducted, and the balance should be deposited into the client's margin account. If the client's margin account is still losing money after the position is closed, the client is also responsible for repaying the entire debt. ^[1]

Margin call

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Margin call is after the daily trading of the futures exchange, the brokerage company must also settle the futures transactions performed by the client on the day, calculate the profit and loss of the client's transaction, adjust the margin account, and cooperate with the clearing house to integrate the "liability-free settlement system". It has been implemented to every trader, so that customers can also achieve debt-free transactions. According to the profit and loss of the client, the brokerage company adjusts the client's margin account, and the other party loses money. When the margin account is less than 50% of the original margin amount, the client issues additional margin to the client. The amount paid as a result of the loss. At the same time, it is necessary to guarantee the performance of the contract on behalf of the client and cope with possible price risks. This is actually equivalent to the broker company lending money to the client for futures trading, which will also affect the broker company in the unfavorable market. Therefore, in order to ensure the safe operation of the brokerage company and protect the interests of the brokerage company, when the client commissions the transaction, the brokerage company generally has to sign an "Account Opening Agreement" with the client. When additional margin is issued and the client does not respond, the brokerage company has the right to hedge and close the futures contract held by the client. After closing the position, the commission that the client should pay to the brokerage company is deducted, and the balance should be deposited into the client's margin account. If the client's margin account is still losing money after the position is closed, the client is also responsible for repaying the entire debt. ^[1]

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In order to prevent debt, the clearing house adopts the principle of marking to the market on a daily basis, and uses daily clearing prices to calculate the profit and loss of members' net trading positions. When a loss occurs and the amount of the margin account decreases, the clearing house requires members to pay additional margin.