Margin

Why are my funds frozen on orders?
What are linked contracts?
What is trading on Margin?
How can I find out about trading on margin?
What is initial margin?
What is variation margin?
What is a margin call?
Can I lose more money than I currently have on deposit with The Exchange if positions go against me?
Does the Exchange have the right to force the liquidation of positions I have in order to meet a margin deficiency?
Can I select which positions should be liquidated in order to meet a margin call?
Can the Exchange increase its initial margin requirements at any time?
How are initial margin requirements derived?

What are linked contracts?
Contracts are linked when they are mutually dependent on one another eg there can only be one winner of an event.

Example:

Soccer Match:
HOME TEAM WIN
AWAY TEAM WINS
GAME DRAWS.
Only one of these outcomes will occur. Therefore the Exchange links the 3 contracts and freeze funds on the worst possible outcome across all 3 contracts.

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What is trading on Margin?
Margin is basically the amount of money the Exchange requires from you to cover any liability you have as a result of any open positions and/or orders.
On the vast majority of member accounts, the Worst Case Loss is the amount of margin frozen on all positions and orders.

Members that meet the exchanges criteria are permitted to trade on margin. This basically means that the Exchange does not freeze the total worst case loss on all positions but rather a proportion of the total potential loss is frozen. This frees up funds for these members allowing them to trade on more contracts.
The Exchange sets margin rates based on a statistical analysis of each market and these rates are monitored very closely. Margin is typically extended on contracts that are typically season long where price movement is initially less volatile. As the season progresses, or as price movement becomes more dramatic, the rates are widened and eventually moved out to worst case loss.

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How can I find out about trading on margin?
Members interested in switching to a margined account to benefit from lower margin rates on long term contracts, should contact help@intrade.com for more details. There is a $5 monthly Margin Fee to cover administration costs to trade on margin.

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What is initial margin?
Initial margin refers to the funds that the exchange requires a member to hold in order to cover open positions and orders.
The amount is calculated on every order when placed to ensure that you have sufficient funds before trading.
For most short-term and all daily in-running contracts the initial margin is the worst case financial loss in holding the position and, in case an order is filled / matched, any open order.
Certain long-term contracts may require less than the Worst Case Loss to be deposited.
Members that Trade on Margin have their initial margin for these contracts calculated using margin rates determined by the exchange. Margin rates can be found in the Contract Specification pop-up which is accesses by clicking on the contract symbol.

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What is variation margin?
Variation margin is the financial amount by which an account balance is adjusted daily to reflect unrealised gains or losses in open positions relative to the closing price.

This is what variation margin will look like in your account statement

Read more about closing prices in the glossary.

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What is a margin call?
Only members that Trade on Margin will receive a margin call.
A margin call is a requirement for a member to deposit additional funds into their account to cover their current positions/orders.
It can be triggered by a change to the initial margin rate or due to variation margin and trading losses.
When a margin call is issued, the member will have two business days to deposit the funds with the Exchange. If the funds are not deposited, the Exchange will liquidate the member positions and close the account.
Alternatively, the member may close out open positions to such an extent that margin is reduced by the size of the call.

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Can I lose more money than I currently have on deposit with The Exchange if positions go against me?
Yes. This will happen if the market moves more than the initial margin amount.
This will usually only be possible members trading on margin with positions or orders on long-term contracts on which the exchange uses margin rates.

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Does the Exchange have the right to force the liquidation of positions I have in order to meet a margin deficiency?
Yes the Exchange does have this right, but normally margin call situations do not escalate to this level.
When a member receives a margin call, notification is sent via email and a message is posted in the members message box on the Trading Screen. The member then has two business days to pay the amount due. If the member fails to meet a margin call in the required period, the Exchange has the right to close the members account and liquidate the necessary positions.

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Can I select which positions should be liquidated in order to meet a margin call?
Yes. As an alternative to depositing additional funds to comply with a margin call, a member may close out positions that will result in the release of initial margin which can be applied to settle the margin call.
This must be done immediately.
In cases where the amount of margin released by these liquidations is insufficient to meet the full margin call requirement the member is still obliged to pay the balance, or they will face automatic liquidation of additional positions.

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Can the Exchange increase its initial margin requirements at any time?
Yes. While there is a schedule for increasing margin rates on the relevant contracts, there may be a need to change margin rates upon short notice to reflect changes in the market.
Details of changes to initial margin rates are published on the Exchange News section of website and all members that Trade on Margin are requested to check regularly for margin change announcements.

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How are initial margin requirements derived?
Margin requirements are calculated by assessing potential losses that may occur on an account.
For short term and in-running contracts we calculate the initial margin based on the potential maximum losses on all positions and open orders.
For long-term contracts, we calculate the initial margin using the exchange's margin rates.
These are based on the likely adverse movement in the price of a contract should the Exchange be forced to liquidate a trading position.
Margin rates are set using statistical information on the underlying event and by analyzing the behavior of prices in the past and by looking ahead to future events. More details on the margin calculations are available from by clicking on Rules and then Margin Examples.