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FAQ on Margin Trading
with Boom
1. What is Margin Trading ?
Trading on "Margin" is using your stock holdings as collateral to borrow money from your broker to buy more stock(s). Investors generally use margin to increase their buying power and enjoy the trading flexibility without having to fully pay cash up front.
2. What are the features of BOOM Margin Account?
Features of BOOM Margin Account are:
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Over 18,000 stocks are eligible for margin financing [details]
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Margin financing facilities can be used to purchase any security in the 12 markets BOOM offers for trading [details]
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No interest charge on unused margin financing facilities [details]
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No interest charge on balance "not due"[details]
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BOOM pays interest for your positive cash balance [details]
3. What are the eligible stocks for margin financing?
All stocks listed in Hong Kong, AMEX, NYSE, NASDAQ, Japan, Singapore and Australia markets are eligible for margin financing ("eligible stocks"), except for warrants, suspended, illiquid and "penny" stocks.
4. What is the margin lending percentage?
The margin lending percentage (the "margin rate") ranges from 10%-50% of the market value of the eligible stock. The list of eligible stocks and respective margin rate are subject to change at the BOOM's discretion without prior notice.
5. How much margin financing facility is in my Margin Account?
The amount of margin financing facility (the "Margin Value") is calculated from the market value and the margin rate of each eligible stock in your Margin Account. As such, the amount of your margin financing facility fluctuate and is based on the value of "collaterals" you are holding.
6. How do I know the amount of margin financing facility in my Margin Account?
The Margin Value of each of your stock holding and the total Margin Value of your Margin Account will be displayed on the "My Portfolio" page.
7. Is there a maximum limit of margin financing facility in my Margin Account?
Yes. Your Margin Account will have a credit limit and it will be the maximum amount BOOM will lend to you. And the maximum is subject to change at BOOM's discretion.
8. If I do not have any stock holding, can I still enjoy some margin financing facility?
Yes. Even you do not have any stock holding in your Margin Account, you can still enjoy margin financing facility when you buy any eligible stock. Your buying power to purchase any eligible stock will be enhanced by the respective margin rate.
For example: When you input an order to buy an eligible stock with 50% margin rate, say HSBC in Hong Kong, our system will calculate your buying power by doubling your fund available. That is, if you have HK$50,000 fund available, you can input a buy order to buy up to HK$100,000 worth of HSBC.
9. Is there any limitation on how do I use the margin financing facility?
No. You are free to use the margin financing facility granted to you. You can use the Margin Value to purchase any security listed on the 12 stock markets that BOOM offers for trading. In addition, it can be a source of funds for any other purpose.
10. Can I choose the currency of the margin loan?
You can only borrow in Hong Kong dollars and / or US dollars.
For example: You brought some Singapore stocks that settled in SGD. You do not have SGD in your account but only have HKD. BOOM will not lend you SGD but will convert your HKD into SGD. If there is insufficient HKD, BOOM will lend HKD to cover the shortage in SGD.
11. How does the currencies conversion works in my Margin Account?
BOOM will base on the Currency Conversion Priority of your Margin Account to cover any shortage currency.
For example: You brought some Japanese stocks. You do not have JPY in your Margin Account but you have sufficient AUD. Since you set-up the Currency Conversion Priority to use AUD first, BOOM will arrange to change your AUD to cover the JPY negative balance.
Another example: You brought some Australia stocks but you do not have any cash in your Margin Account. Since you set-up the Currency Conversion Priority to use HKD first and then USD, BOOM will arrange to lend you HKD to cover the required AUD. And we will calculate debit interest based on your HKD negative balance.
For details, please refer to the FAQs on Currencies Conversion.
12. What is the Margin Interest Rate?
BOOM will charge loan interest on the outstanding balance at HK prime plus 3 % p.a. or financing cost plus 3% p.a., whichever is higher, and the interest rate applied is subject to change from time to time. The loan interest rates ("debit interest rate") are shown in your daily / monthly activities statements.
13. Will BOOM charge any loan interest on the unused margin financing facility?
No. There will NOT be any interest charge on the unused Margin Value available in your Margin Account.
14. How to calculate the interest on margin loan that I need to pay?
Interest on margin loan will only be charged on any outstanding amount on or after trade settlement date (e.g. settlement date for Hong Kong market is T+2, i.e. 2 days after "trade date"). It is calculated on "due" balance on a daily basis and it will be deducted from your BOOM account on a monthly basis on the last day of the month.
For example: You have HK$50,000 of cash in your Margin Account. You bought HK$70,000 worth of stocks on 18 July 2006 and the settlement date is 20 July 2006. BOOM will start charging you debit interest on the HK$20,000 loan (HK$70,000 - HK$50,000) on 20 July 2006. However, if you deposit HK$20,000 into your account on the settlement date (i.e. 20 July 2006), there will be no interest charge in your Margin Account.
Another example: You have HK$100,000 of cash in your Margin Account. You bought HK$120,000 worth of stocks on 18 July 2006 and the settlement date is 20 July 2006. You deposit HK$20,000 to your account on 25 July 2006. We will calculate the loan interest on the “due” balance of HK$20,000 for 5 days from 20 July 2006 on a daily basis. And the total margin loan interest will be deducted form your account on 31 July 2006.
15. Will BOOM pay interest for my positive cash balance in Margin Account?
Yes. BOOM will pay interest to your HKD, AUD or USD positive balances in your Margin Account. The saving interest rates (i.e. credit interest rate) are shown in your daily / monthly activities statements.
16. In what situation will I receive a "Margin Call"?
When the amount you borrow is higher than the margin value of your account, there will be a Margin Call. It is generally due to the fall of market price of your stock holdings. When the market value of any eligible stock in your holding decreases, the Margin Value of your account will be decreased accordingly.
17.What do I need to do if I receive a "Margin Call"?
When you receive a Margin Call, you must cover the call by:
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depositing the called amount of funds, or
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liquidating some stocks in your account, or
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depositing sufficient quantities of eligible stocks.
You generally have one business day to meet the call; however, this can be shorter in volatile market conditions. BOOM retains the full right to liquidate securities in your margin account in order to meet the margin call requirement.
18. What happens if the market rebounds after receiving the "Margin Call"?
Once the Margin Call is triggered, you have the obligation to fulfill the requirement even the equity value of your Margin Account returns to a higher level as the market rebounds.
19. What will happen if I am not contactable when my Margin Account is under Margin Call?
BOOM will use all means to inform you about the Margin Call. However, you will be held responsible of your account activities at all times, and should be aware of your risk exposure when using the margin financing facility.
Please bare in mind that BOOM reserves the full right to liquidate securities in your margin account in order to meet the margin call requirement.
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