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I am under the impression that Single Stock Futures legislation left the
responsibility for setting the margins with the U.S. Federal Reserve, the
same entity that sets the margin rates for regular stock trading. Someone
correct me if I am wrong about this.
Thus, stocks and single stock futures are supposed to be on equal margins.
However, and isn't there always a however, futures are one day settlement.
Stocks are not. Stocks are what, T + 3 now? Trade day, plus 3 days to the
settlement? ( I am not a stock broker, so anyone is welcome to correct me if
I am wrong.)
There are no "exchange" daytrading margins in futures. The exchange just
wants the money for the positions by the end of the day. The brokerage house
can set the whatever daytrading margins, or overnight margins in excess of
exchange margins, that it wants. And given that futures brokerage houses
will have the funds in hand the first day, or the account will be dealt with,
I can see an early influence from the daytraders being a factor. The futures
brokerages, because of the same day settlement, are in a better position to
manage their risk. Thus, I think they can be a little more lenient in the
day trading margins for single stock futures. But this is just a guess.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it! John J.
Lothian is the President of the Electronic Trading Division of The Price
Futures Group, Inc., an Introducing Broker.
In a message dated 2/18/01 3:56:06 PM Central Standard Time,
prosys@xxxxxxxxxxxxxxxx writes:
<< Better question is:
WHO suggested that 50% be the default margin for single-stock futures ?
The new instrument will have a hard enough time gaining <any> popularity,
but the above margin req. will just "kill it" IMHO.
margin: chance of success comment
------ ------------------------
30% : maybe
20% : it has a 50-50 chance
10% : now you're talking "winner"
That's right....I want to control $60k of Microsoft for a measley $6k
tie-up.
Effectively: A $1 move = 17% return on margin
Anyone else ?
>>
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