Margin in non-USD markets

Discussions about brokerage firms for futures, stocks and other tradeable instruments.
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Philemon
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Margin in non-USD markets

Post by Philemon » Sun Jan 01, 2006 2:39 pm

How do US brokers handle margins for futures contracts in non-USD markets?
1. Tranfer cash from USD account to contract's "native" currency account.
or
2. Convert margin quoted in contract's "native" currency into USD, in order to see if the USD account balance covers the resulting amount. No real "transaction" (money tranfer) takes place.

Thank you in advance,

Philemon

sluggo
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Post by sluggo » Sun Jan 01, 2006 8:25 pm

Man Futures does it the way you describe in list item number 1.

Philemon
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Wish List Item

Post by Philemon » Sun Jan 01, 2006 9:56 pm

Thank you sluggo.

After my post and a lot of internet searching later - seems this information is not readily available- I see that Interactive Brokers offers another way of covering margin for contracts that are traded in a currency other than the customer's main account currency. They loan money for margin in the "foreign" currency for the duration of the trade and charge interest for negative balances (meaning that if the position is a loser you would get charged interest on the negative amount). That way the customer does not have to deal with exchange risk for the amount put up as margin, he only has currency risk on the position's profit.

However, it seems that most brokers handle margin in non-USD contracts the way sluggo describes that Man Futures does. They actually need the margin deposit to be in an account, denominated in the same currency as the contract. It is important. therefore, not to undermine the exchange risk imposed on cash put up as margin in those non-USD positions, when backtesting.

(MOD: TBB wish list item moved to Customer Support Area)

(EDIT: The last sentence has been edited because part of the message was moved to another topic. As a result the last sentence lost its meaning as it stood. Philemon)

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