FAQ

Exchange rate is the conversion rate of 1 unit of a currency (Base Currency) to a certain unit of another currency (Term Currency) and is quoted as Base Currency / Term Currency.

Within the scope of FXMT, the exchange rate is a Direct Quote when the Base Currency is USD while it is an Indirect Quote when USD is the Term Currency; when the currency pair does not involve USD, it is a Cross Rate.

The minimum initial margin requirement is 5% of the contract amount (5% is the current setting and which is subject to change from time to time). As all margin requirements are calculated in USD, the minimum margin deposit required = GBP250,000 × 1.2100 × 5% = USD15,125.00.

Without taking into account the interest expense incurred or interest income generated from FXMT transaction, the profit and loss of a foreign exchange contract is calculated by comparing the contract rate and the prevailing market rate.

Contract: Direct Quote
Buy / Sell: Buy

Contract: Direct Quote
Buy / Sell: Sell

Contract: Indirect Quote
Buy / Sell: Buy

Contract: Indirect Quote
Buy / Sell: Sell

Contract: Cross Rate (Term Currency is Direct Quote)
Buy / Sell: Buy

Contract: Cross Rate (Term Currency is Direct Quote)
Buy / Sell: Sell

Contract: Cross Rate (Term Currency is Indirect Quote)
Buy / Sell: Buy

Contract: Cross Rate (Term Currency is Indirect Quote)
Buy / Sell: Sell

Holding an open position overnight will incur interest expense or generate interest income depending on the interest rates of the 2 embedded currencies. Customers will receive interest on the currency bought and pay interest for the currency sold, which will be accrued on a daily basis. Settlement of accrued interest will be effected in USD on the second last business day of each month or on the Value Date of the close-out deal, whichever is earlier.

You can call our FX Margin Trading Hotline (Tel. 2598 0401) anytime. Take note that, for interest calculation, the deposit interest rate is applicable to the currency you buy and the lending interest rate is applicable to the currency you sell. There are spreads between the deposit and the lending interest rates even for the same currency.

Margin level is calculated as Equity ÷ Notional Amount of outstanding position(s) x 100%, both are denominated in USD, where Equity = Margin Deposit held for a portfolio – Unrealized Mark-To-Market Loss of the portfolio + / - Accrued Interest Income / Expense of the contracts in the portfolio – Realized but not yet Valued Loss.

To enter into a new contract, the Available Margin should be sufficient to meet the initial margin requirement for the new contract, where Available Margin = Equity – [Notional Amount of outstanding position(s) × Initial Margin (currently set at 5%)].

If the margin level drops below the Call Margin Level (currently set at 4% and which is subject to change from time to time), the customer will be contacted on the Bank's best effort basis, and reminded that the Bank will liquidate all his / her outstanding position(s) if additional margin is not placed and the margin level falls below the Cut Margin Level.

If a customer does not top up the margin and subsequently the margin level drops below the Cut Margin Level (currently set at 3% and which is subject to change from time to time), the Bank may close out all the outstanding position(s) without prior notice. Customers should check his / her own positions and margin requirement regularly. The customer will be liable for any resulting loss, which may be in excess of the margin deposit when the market condition may make it difficult or impossible to execute the closeout order.

Customers can place a Stop-Loss Order for the purpose of limiting the downside risk of an outstanding position. However, the execution rates cannot be guaranteed, as it depends on the next executable rate in the market. In a normal market situation, the execution rate is normally a few pips away from the order level. For example, if a customer has placed a Stop-Loss Order to buy AUD / USD at 0.6800 with the purpose to limit the loss of an outstanding short AUD / USD position, we will execute the order when AUD / USD is bid at or above 0.6800 and normally buy at the next market offer rate which would be 3 to 5 pips higher than the bid rate in a normal market. However, when the market volatility is high, the bid-offer spread will be much wider and the next executable rate may deviate significantly from the pre-set order rate. In such situation, the execution rate would be significantly worse than the pre-set order rate placed by the customer, and the loss may not be limited to the intended amount.

To avoid undue loss accumulation and unnecessary interest expenses, the Bank shall be entitled, but not obliged, to roll over all outstanding position(s) of foreign exchange contracts under the FXMT portfolio once a year on a specific day it determines or at such other intervals as the Bank deems appropriate. All the outstanding position(s) will be closed out and reopened under a new contract using the same prevailing market rate, and the position(s) in the same currency pair will be consolidated into a single open position in a new contract.

Secured deposits are qualified for protection under the Deposit Protection Scheme in Hong Kong from 1 Jan 2011 and therefore charged deposits maintained in the Foreign Exchange Margin Trading Settlement Account and other account(s) designated by the Bank as margin collateral by FX Margin Trading Account will not change the status of protection under the Deposit Protection Scheme in Hong Kong.

The Bank enters into principal transactions with clients under FXMT and executes trades over the counter or trades can be made via our own trading membership or our affiliate, connected parties or third party brokers. When the Bank enters into principal transactions (which are not back-to-back in nature) with clients, only in the circumstances where the Bank has assessed that the client is legitimately relying on the Bank to provide best execution and the Bank has concluded that best execution shall apply having regard to the following factors collectively: (i) whether the client initiates the transaction: if the client approaches the Bank and initiates a transaction, then it is less likely that the client is placing legitimate reliance on the Bank; (ii) whether it is a market convention for clients to "shop around": if it is the market convention or practice for the client to "shop around" by approaching different dealers or providers who may provide a quote for the particular product or asset class and the client has the ability and the ready access to "shop around" for that product or asset class, it is less likely that the client is placing legitimate reliance on the Bank; (iii) whether it is relatively transparent market: if the pricing information for the particular product or asset class is transparent and it is reasonable that the client would have ready access to such information, then it is less likely that the client is placing legitimate reliance on the Bank; and (iv) whether a disclosure is made to the client that no best execution is provided: if the disclosure to the clients clearly state that no best execution is provided by the Bank and the client understands and acknowledges the same, it is an indication that the client agrees that he / she is not placing any legitimate reliance on the Bank.

Where the Bank has determined that best execution applies to a particular transaction, the Bank will take steps to execute the transaction on the best available terms by taking into account a variety of best execution factors, which include: a) price; b) cost; c) speed of execution; d) likelihood of execution; e) speed of settlement; f) likelihood of settlement; g) size and nature of the order; and h) any other relevant factors. The aforementioned best execution factors are not listed in any particular order of priority and the Bank will determine the relative importance of the best execution factors on a case-by-case basis. Customers may instruct the Bank to take into consideration certain factors which customers may, from time to time consider to be of particular importance (e.g. executing at a particular price limit). Where customers provide the Bank with such specific instruction, the Bank, will take reasonable steps to execute the customers’ orders in accordance with such instruction. Where such specific instruction conflict with, or otherwise prevent the Bank from taking the steps designed and implemented as described in the policy on best execution (the "Policy") to obtain the best available result for the execution of the order, best execution shall only apply to those aspects of the order not covered by the specific instructions. Where the Bank has complied with this paragraph in respect of executing orders with specific customer instruction, the Bank will be deemed to have taken all reasonable steps to provide the best outcome in such circumstances, and the Bank shall consider our duty of best execution to be satisfied.

In addition to regular reviews on an annual basis, the Bank will also carry out ad-hoc reviews of the Policy if we become aware of any material change of regulatory requirements or internal practice. Where necessary, customers will be updated (if any) accordingly. The Bank will carry out regular checks to review our quality of execution and to identify any issues that may affect our ability to secure the best possible outcomes for customers or whether we need to make changes to any of our execution arrangements.

The Bank may engage affiliates, connected parties or third parties to execute customers' orders. In any case, the Bank will carry out appropriate due diligence and also adopt systematic process to continuously monitor execution outcomes of our affiliates, connected parties or third party brokers. Under all circumstances, soft dollars, rebates and other inducement arrangements, if any, will be disclosed to customers in accordance with applicable regulatory requirements.