Pending Changes for Futures Trading Customers in the USA
On January 7, 2013 the NFA asked for a 30 day extension from the January 15 th rollout of Gross Margining. If or when gross customer margining happens FCM’s will need to apply Gross Margining when posting margin to each derivatives clearing organization (DCO)
Customer Gross Margining or CGM would require FCMs to post your margin money for the positions you hold to the exchange whereas before FCMs were only required to post margin for the net positions they held.
Difference between Net Margining and Gross Margining
What net margining means is if you were long one Gold Futures Contract and an Oil Contract and someone else was short one Gold and short 2 Oil Contracts, then the FCM would only have to post the margin for the net 1 short Oil Contract and not the other positions. +1 Gold, – 1 Gold and +1 Oil, -2 Oil = -1 Oil Futures Contract with Net Margining. If the money was not held at the exchange, then the money could stay with the FCM and be used to generate cash for them.
Now using the same positions as above an FCM must now post margin to the exchange or DCO for 2 Gold positions and 3 Oil Positions.
You can learn more about Gross Margining by visiting the BackBay Future Blog.
J. Peter Slaga is Vice President of the Futures Division for Back Bay.
Peter is a 15 year+ veteran in the futures and options industry. Peter has written numerous research
articles and given presentations on options, forex and trading technology. You can connect with Peter