The prices of securities fluctuate, sometimes dramatically. Margin trading in securities involves significant risk and losses may exceed the value of your collateral. Contingent orders may not necessarily limit losses as market conditions may make it impossible to execute contingent orders. Additional margin deposits may be required at short notice. Your collateral may be liquidated without your consent and you will remain liable for any resulting deficit in your account. You should therefore carefully consider whether margin trading in securities is suitable for you in light of your own financial position and investment objectives. It is as likely that losses will be incurred rather than profit made as a result of dealing in securities.
What is margin trading? What are the differences between cash and margin trading?
With margin trading, you only need to put up a fraction of the total cost when you buy shares. Because you have borrowed money to buy shares, these shares would be held as collateral. For cash trading, you must have sufficient funds in your settlement account when you place a buy order.
How does leverage work for margin trading?
For example, you want to buy 400 shares of company A at HKD100 each. This will cost you HKD40,000. If you use margin lending facility to purchase these shares and the margin ratio of the stock is 60%, you are only required to pay HKD16,000 to buy 400 shares of company A. If the share price of Company A rises and your shares are sold at HKD110 each, not taking into account of transaction charges and the share margin interest, you can earn a profit of HKD4,000. With a principal amount of HKD16,000, the return is around 25%. Compared with the return of 10% with cash trading, the return is 1.5 times more.
Remark: All the figures on the above example is for illustrative purpose only. Brokerage and other transaction charges are not included. (Please note that it is as likely that losses will be incurred rather than profit made as a result of dealing in securities and losses may even exceed the value of your collateral.)
What percentages of margin ratio are being offered for your share margin services?
The margin ratio offered by our share margin services is 40%-60% of marginable stocks.
Is the settlement day for purchased shares through margin trading at T+2?
Can I purchase shares with cash through margin trading service?
Yes. But please note that all shares purchased through the margin trading account (whether purchased with margin lending facility or not) will be used as collateral. This means these shares may also be sold during forced liquidation should such situation occur.
If I deposit more cash than it is required during purchase of shares, my margin facility amount (i.e. the "Maximum Facility Amount") will not be fully utilised. Can I utilise the unused margin facility amount for my next share purchase?
Besides SMS, will you call me by phone separately for margin top up?
Besides SMS, Hang Seng Bank will not notify you separately for margin top up. Therefore you should be fully aware of the market situation and your account status. Please note that if the price of the marginable stock falls, the Maximum Facility Amount will be reduced automatically. You should maintain your account at a safety level (for example, debit balance below the Maximum Facility Amount ) because if the Loan-to-Value ratio increases to 70%, we will liquidate your account without prior notice.
If I receive a margin call, do I have to make a margin top up? How much time do I have?
Our margin call is to remind you of your current account status and suggest you to make a margin top up. Your account will be liquidated without prior notice when your Loan-to-Value ratio rises to 70%. In addition, you should be fully aware of the market situation and your account status. You should maintain your account balance at a safety level (for example, debit balance below the Maximum Facility Amount) to avoid forced liquidation.
Why is it that I sometimes do not receive any SMS?
Your mobile phone must have sufficient Short Message Memory. Otherwise, you will not be able to receive any new SMS. You should delete old messages regularly so your mobile phone will have enough Short Message Memory. In addition, unless your mobile phone has set up SMS diversion service, you will not be able to receive any SMS from us if you transfer the number registered with our Bank to another fixed line phone number or mobile phone number.
If I am abroad and have registered for roaming service, will I receive any margin calls?
Under normal situation, you will still receive your SMS. Most telecom service providers will not levy extra charges for SMS via roaming service. Customers should check with their telecom service providers for full details.
Can I deposit a cheque or stocks for margin top up?
You should use cash to top up your margin account. Hang Seng Bank will not calculate your Loan-to-Value Ratio with uncleared cheque or unrecognised stock deposit. It is only after the cheque has been cleared and the stocks confirmed before your Loan-to-Value Ratio can be lowered.
Through which channels can I top up my account?
Besides all the Hang Seng Bank branches, you can top up your account through ATM, Phone Banking Service and Hang Seng Personal e-Banking.
Through which telecom service provider can I receive margin calls?
If your mobile phone number is a local mobile phone number issued by any telecom company in Hong Kong which starts with specified digits, you will receive margin calls from us.
Customers are required to register for the "Instant Order Confirmation" service and are responsible for any fees and charges which may be levied by the telecom company from time to time.
When my Loan-to-Value Ratio rises to 70% or above, will you liquidate my account immediately?
Hang Seng Bank will conduct a valuation on your shares at around 11:00 am, 12:00 noon, 3:00 pm and after 4:30 pm. If your Loan-to-Value Ratio rises to 70% or above, we will liquidate your account without prior notice. However when the market is volatile, we will conduct a valuation on your shares anytime and if your Loan-to-Value Ratio rises to 70% or above, we will liquidate your account without prior notice. Because valuation and forced liquidation take time, the 70% Loan-to-Value Ratio is not indicative that the liquidated price and valuation price are equivalent.
Regarding the securities valuation conducted at noon and in the afternoon, if the Loan-to-Value ratio rises to 70% or above and customer deposits sufficient cash to bring the debit balance down to a level within the Maximum Facility Amount before market opens in the afternoon or before the next trading day, your account will not be liquidated before the market opens in the afternoon or on the next trading day.
When will forced liquidation stop?
Hang Seng Bank will sell the shares in your account at their market value in board lot until the debit balance is below the Maximum Facility Amount. Therefore, after forced liquidation, the Loan-to-Value ratio may fall below the margin ratio.
Will you notify me before forced liquidation takes place?
No. Therefore you should be fully aware of the market situation and your account status. You should maintain your debit account balance at a safety level (for example, below the Maximum Facility Amount) because if the Loan-to-Value ratio increases to 70%, we will liquidate your account without prior notice.
Is it true that if my Loan-to-Value ratio is always below 70%, you will not liquidate my account?
No. If your Loan-to-Value ratio maintains at a level beyond the required margin ratio and not more than 70% for a continuous period of 6 months or such other period as may be prescribed by us in our absolute discretion from time to time, we still need to liquidate your account. However we will normally inform you two weeks beforehand so that you can deposit sufficient cash into your account to bring your debit balance to a level below the Maximum Facility Amount. In addition, if we, in good faith, consider that the market conditions are too unstable or unfavourable or abnormal or are likely to expose you to unacceptable risk or heavy losses, we will also liquidate your account.
Why are there two different tiers of interest rate charges?
If the utilized loan exceeds the Maximum Facility Amount, the account will be overdrawn. A higher interest rate will be applied on the overlimit (the loan amount that is greater than the Maximum Facility Amount).
Is the brokerage fee for share margin trading service and securities trading services the same?
Except for interest charges, all fees for Share Margin Trading Account and Securities Account are the same.
If I sell the shares purchased on the same transaction date, am I required to pay the interest for this margin trading transaction?
No interest will be charged for this transaction if the sale proceeds can cover the entire overdrawn amount.
The Bank reserves the right to revise margin loan interest rates, the list of marginable stocks and the margin ratios from time to time.
Hang Seng Share Margin Services are provided subject to the Terms and Conditions for Share Margin Services. Particulars of the Services shall be subject to the said Terms and Conditions.