CMC Markets Margin Call

Ever wondered what a Margin Call notice looks like? Here is an actual margin call from CMC Markets

Posted in Trading Services, Submitted by Trading Critic on Wed, 2006-09-27 05:28.
Ever wondered what a Margin Call notice looks like? Here is an actual margin call from CMC Markets

Have you ever wondered what a Margin Call looks like? Here is an actual margin call notice from CMC Markets I had the benefit of receiving by email the other day. Why did I receive it? Well… I had recently withdrawn some money from my trading account, effectively taking some profits. Then a recent trade went against my position, so the account went into the red on the margin side because of the lack of funds.

If you don't know anything about CMC Markets, they are a market maker which means that for the financial products that they provide: namely derivatives of the CFD (Contracts For Difference) type, they derive their prices of their products from the market. They do this for markets like the Australian Stock Exchange (ASX), NYSE, NASDAQ and more. Because it is a derivative product, there are many terms and conditions that make this product work - too many to describe here. But here's an interesting thing to note: CFDs are legal in England and Australia among other places but illegal in USA. Go figure. (I think it has something to do with their options/derivatives markets)

If you do get a Margin Call from CMC Markets don't fret too much. They don't immediately do anything to your account. You just simply get continuous emails either on the hour or whenever the price of your portfolio/stock/share/forex trade or whatever dips against your position (either long or short) to negate your margin in your trading account. I do suspect however, once the debt, or the negative margin eats into the capital on hold they would definitely close off your trade in order to protect you and themselves from further losses. (However, don't take my word as gospel though - there is that inherent risk of the market crashing tomorrow - who really knows right?) The question in the back of my mind is that, what will happen if the market does crash, or the position your are holding does crash through your stop loss limit (if you had taken the time and spent some money to take a guaranteed stop loss (GSL) then you would be safe), and through the margin you hold in your trading account? What then? That's a pretty big risk if you think about it - it is a probable event, but in my opinion unlikely. (But of course, you must be prepared to take any of the consequences if you dare to trade the markets) CMC Markets are famous for their derivative product: CFD's

Subject: Margin call notice for xxxx xxxx (xxxxxxxx)
Dear Client,

YOUR ACCOUNT IS ON MARGIN CALL. YOU MUST SEND FUNDS TO YOUR ACCOUNT IMMEDIATELY.

Due to the recent movements in the markets you are required to deposit additional cleared funds to cover the following margin requirement.

It is your responsibility to ensure your account is fully margined at all times. To maintain your open position(s), you must pay the additional cleared funds immediately. In accordance with our Terms of Business, if you do not send us the required margin as outlined above, we may place stop loss or liquidation orders to close the open position(s).

You can make a payment to your account using your credit/debit card on-line by visiting

http://www.cmcmarkets.com.au/payments

Alternatively you can pay via the Marketmaker software by clicking on the $ symbol in the top left-hand corner.

We also accept electronic bank transfers or cheques, details of which can be found at the above web address. Please ensure that any cheques or electronic transfers are presented with your full Name and CMC Markets Account Number for identification purposes.

As we can only allow you to trade with cleared funds in your account, any funds in transit or promised funds will not be credited to your account until they are cleared and received by us. Please note that Cheques take five working days to clear upon receipt. Third party payments are only accepted in exceptional circumstances. Please contact Client Services before attempting to make a payment in a name other than your own, as failure to do so may result in the funds being returned to the payee.

It is important to note that even if you have sent payment but your funds have not cleared with us, your open position(s) may be closed if the markets move further against you.

We recommend that you have sufficient margin in your trading account to cover your open position(s). If you choose to ignore this message or do not pay sufficient cleared funds to your account then we may take the necessary action to reduce your position(s) to meet your margin requirement.

Should you have any questions relating to this e-mail then please do not hesitate to contact us on the numbers detailed below.

Regards,

Client Services

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