Hong Kong Regulations

LEVERAGED FOREIGN EXCHANGE TRADING (BOOKS, CONTRACT NOTES AND CONDUCT OF BUSINESS) RULES - SECT 12

Client's margin

Caution: This is a past version. See the current version here.

PART IV

MARGINS

(1) A licensed trader shall set the initial margin and maintenance margin
level for its clients at not less than 5% and 3% respectively of the principal
amount of the contract offered by the licensed trader.

(2) Except as provided in subsection (3), no licensed trader shall execute any
contract for a client until and unless the licensed trader has received from
the client a margin deposit adequate to cover the initial margin required.

(3) A licensed trader may execute a contract for a client, other than a
discretionary account client, without first having received the initial margin
from that client if it is reasonably satisfied that, given the investment
objectives, investment strategy and financial position of that client, the
full amount of the initial margin will be deposited by the client within the
next trading day or such shorter period as may be specified by the licensed
trader.

(4) Subsection (3) does not apply to a client-

   (a)  who has never entered into a contract through or with the licensed
        trader;

   (b)  who has never paid, or been asked to pay, any initial margin to the
        licensed trader; or

   (c)  who has failed to satisfy the initial margin requirement as specified
        in subsection (3) on at least 2 occasions during the period of 1 year
        immediately preceding the transaction for which the deferral of the
        deposit of initial margin is requested by the client.

(5) For the purposes of calculating the amount of any margin deposit required
under this section, the basis and method of valuation applicable to margins as
provided in the Leveraged Foreign Exchange 
Trading (Financial Resources) Rules ( Cap 451 sub. leg.) shall be adopted.
(Enacted 1994)