Risk Management of CNS Trades in Hong Kong Market - Margin Rate 
01/02/2016 
 

Current Margin Rate

Current Margin Rate (effective from 4 January 2016) is 6%.

Determination of Margin Rate

(i)

HKSCC determines the Margin Rate using the following parameters:

Determination of Benchmark Rate
Method Exponentially Weighted Moving Average
Volatility Change on daily closing of Hang Seng Index (HSI) based on historical data for the past 90 trading days
Confidence interval 3 standard deviation of the volatility function (i.e. 99.73%)

Margin Rate = Benchmark Rate x (1 + Buffer Rate)
Buffer Rate A 10% cushion will be added on the benchmark rate to avoid frequent adjustment of Margin Rate during a month
Minimum level Margin Rate is subject to the minimum of 5%

(ii)

Review of Margin Rate

HKSCC performs regular review and update of Margin Rate on a monthly basis. Margin Rate will be updated on the 1st Business Day of each month.

 

(iii)

Ad-hoc Review of Margin Rate

HKSCC also monitors the current Margin Rate to ensure that sufficient cover is provided by the Margin Rate despites the change of market volatility. HKSCC recalculates the benchmark rate on every trading day and compares it against the current Margin Rate. When the benchmark rate exceeds the current Margin Rate, an ad-hoc review and revision of the Margin Rate will be triggered. A circular will be issued to Clearing Participants to notify them of the revision. The revised Margin Rate will be effective from the second Business Days after the issuance of the circular.

 

(iv)

Notification of Change in Margin Rate

For monthly review of Margin Rate, HKSCC will notify Clearing Participants of the revised Margin Rate at least three Business Days before the effective day by means of circular.

For ad-hoc review of Margin Rate, notification will be made to Clearing Participants two Business Days before the effective day.

All notifications of change in Margin Rate will be available in CCASS Terminal and on the HKEx website under “HKSCC Participant Circular”.