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MARGIN POLICY AND PROCEDURES
 

MARGIN POLICY AND PROCEDURES

 

Introduction

 

These margin policy and procedures address how Mouette Securities Company Limited (“Company”) monitors customer accounts, the rights it may exercise, and when these rights may be exercised in the event of margin call situations.

 

It is the customer’s responsibility to continuously monitor and ensure that sufficient margin is available on his/her account at all times.

 

Margin Requirements

 

Securities Margin Financing refers to the provision of credit facilities to clients, subject to availability of fund and provision of satisfactory security, up to such percentage of the market value of the securities collateral maintained with Mouette Securities Company Limited (the Company) as the Company may determine or vary from time to time at their discretion. The Client shall maintain a level of deposit or margin as determined by management from time to time or may be required by the applicable laws and the rules and regulations of the Exchange.

 

A credit limit will be assigned to each margin client depending on his financial background, creditworthiness, trading experience and recommendation by the Account Executive (if any).

 

The margin facility shall be secured by pledged marketable shares which are traded on  any approved Exchange and acceptable to our Company.

In respect of any type of stocks deposited by a client into his margin account, MSCL will provide financing through granting of credit limit to that client up to a certain percentage (margin ratio) of the market value of the deposited stocks, The margin ratio of list of acceptable stock can be found in our Company website (www.mscl.hk) .

 

The Company may impose a higher margin requirement (e.g. a lower margin ratio), as the Company sees fit, on a customer that is deemed as high risk based on geographical, financial, trading and professional information available to the Company.

 

The Company’s prescribed margin ratio will be reflected on the customer’s daily statements.

 

Withdrawal of shares is not allowed unless the outstanding loan under the facility has been fully repaid.

 

Clients are not allowed to transfer funds from their margin trading accounts to other securities trading accounts maintained with MSCL and/or its affiliates when there is a debit balance under the margin facility in the account.

 

Magin call

 

Outstanding balances on any margin account should be maintained at the lower of the following:

 

1.     Approved margin loan limit; or

 

2.     Aggregate margin value (discounted value of pledged shares) of the client's portfolio.

 

The triggering level of making margin calls (or margin shortfalls) occurs when the client's margin loan outstanding is greater than the approved margin loan limit or aggregate margin value of the client's portfolio. Margin calls can be triggered by any one or more of the followings:

 

1.     Decline in market value of stocks, which reduces the margin value;

2.     Trading in excess of the approved margin loan limit;

3.     Removal of stocks from the marginable stock list;

4.     Month-end interest debit-to margin accounts, and

5.     Prolonged suspension of a company (suspended more than 2 days).

 

Margin calls can be made either verbally by phone,  by email or by fax or by SMS message (if applicable) depending on market conditions and the amount of margin call.

 

In respect of a margin call , the client shall be given a time depending on the market condition which the client must either deposit additional funds/securities to the account or realize sufficient securities to rectify the under margin situation.

 

All margin calls should be satisfied on the same day. If a client fails to rectify the under-margin situation after the expiration of the time limit and no alternate arrangement has been reached, the client's portfolio shall be liquidated in the market.

 

If the market prices of the collaterals fall rapidly, subject to the Company’s discretion and consideration of the factors behind the repaid market price fall, the Company should trigger the immediate forced liquidation of the client’s portfolio, so as to limit the credit risk posed to the company by the margin clients.

 

For this reason, customers are encouraged to maintain adequate funding above their margin requirements to prevent margin calls during times of market volatilities and public holidays.

 

Forced Liquidation Procedures

 

  1. For accounts with a margin shortfall that necessitates a forced liquidation, the Company would first make margin call by phone or by email or by fax or by SMS message (if applicable) to the Client or communicate with relevant Account Executive and urges the client to make cash deposit or to liquidate positions at their discretion within a set time frame.
  2. Should the client fail to meet the shortfall within the time limit, the Company will serve a final notice to both the client via telephone or email or SMS message or other achievable means to the client. If the client fails to respond to the final notice, Our Company will arrange to liquidate the client’s position. The liquidation should be executed on the best available terms to the client.
  3. Immediately following the liquidation, the client should be notified of the actions taken by phone or by email or by fax or by SMS message (if applicable). This shall then be confirmed in writing along with the relevant daily statement.
  4. If there is a debit balance in the account after realization of all securities, Client is required to settle with immediate payment. Any failure to settle may cause appropriate legal actions to be initiated If the account is considered doubtful.

 

 If in doubt, customers should contact his Account Executive or our Customer Service Department.