We Aim To Be Different With Simple Margin Rates
All accounts receive Initial Margin leverage of 6x when depositing sufficient funds with DRS Markets irrespective of which marginable US Securities you wish to trade.
Our daily margin leverage increase to 12x dependant upon the level of funds deposited to trade with DRS Markets.
Depositing between $50k and 100k will generate leverage of 10x.
Deposits above $100k will entitle you to 12x leverage on our CFD trading accounts in marginable securities.*
What Is Margin Trading?
To understand margin trading, you need to understand leverage. Leverage is a fundamental concept in CFD trading. This is different from a regular equity account, with which you trade using the money in your account. Leverage enables you to obtain exposure to a stock by amplifying the impact of your money . A 25% initial margin, for example, allows you to buy up to four times as much stock as you could with just the cash in your account .
An initial investment is required to open your margin account, known as your minimum margin. Once the account is opened and operational, you can borrow a substantial percentage of the purchase price of a security,dependant upon the amount of funds maintained in your trading account. This portion of the purchase price that you deposit is known as your initial margin .You can keep your position for as long as you want, provided you fulfil your obligations, although this will be subject to finance charges applied daily.
There is also a restriction called the maintenance margin,which is the minimum account balance you must maintain before your broker asks you to deposit further funds or sell a position to pay down your loan. When this happens, it is known as a margin call. A margin call forces the investor to either liquidate their position in the stock or add more cash to the account. If,for any reason you do not meet a margin call, the brokerage has the right to sell your securities to increase your account equity until you are above the maintenance margin. Not all stocks qualify to be bought on Margin.
Conventional Trading vs. Margin Trading
Let’s assume that Microsoft® shares are trading at $20 per share. If you want to purchase 100 shares of Microsoft®, you invest $2,000. Now, if the price of Microsoft® shares rises to $25 per share in the future, you will be able to sell the 100 shares at $2,500. Essentially, you make a profit of $500. Your profit margin is 25% because you’ve made $500 profit with an investment of $2,000. The important thing to note here is that when you purchased the stocks for Microsoft®, you actually owned the stock.
This does not apply to margin trading. When you are trading with margin with a broker, you are taking a position on the rise or fall of a stock price, and you do not actually purchase the stocks. Imagine that the broker gives you an offer of investing in margin trading at a leverage of 10:1 for 100 shares of Microsoft®. This means that the broker expects you to pay 1/10th of the total amount for 100 shares. In this case, it will be 1/10th of $2,000 – which is $200. Now, when the price of Microsoft® stock touches $25 per share, your profit will still be $500 as in the last case. What does this mean? This means that you earn a profit of $500 by investing just $200. What is your profit percentage? The profit percentage is 250%.
In real life, the leverage may vary depending on the kind of broker and the specific instrument you are using. However, the concept remains the same. Losses can also arise so only trade what you can afford to lose.
Open Long or Short Positions
Unlike Equities ,CFD’s enable a trader to speculate on whether the value of the underlying security will go down as well as up. So you can not only take a position anticipating a fall in a companies share price but also use this functionality to hedge an existing portfolio of investments if you believe that market conditions may not prove favourable in the short term. This way, if the value of your portfolio does fall, the profit in shorting the CFDs would help you offset these losses, enabling you to retain your portfolio by minimising any significant loss to its overall value.
Overnight Finance Charges
DRS Markets charges competitive rates for overnight finance of your positions. If you keep a position on a security open overnight we will make an adjustment to your account to reflect the interest cost of holding your position. This is calculated as a debit for long and short positions using a flat overnight financing rate of 3%. CFD positions closed prior to the end of the day do not incur any overnight financing charges.
We also make adjustments when a share goes ex-dividend to reflect the change in value of positions on that security. This adjustment will be a credit for long positions and a debit for short positions in the same way as if you held the underlying stock.
Short sale trades may also include an additional adjustment for borrowing fees/short locate on shares that attract a higher borrowing cost in the underlying market. These fees can be significant and are subject to large changes as short interest in a stock increases. Please be aware of this additional risk/charge when holding short trades in less liquid shares
Inactive Account Charges
DRS Markets will charge $50 per account per month as an inactivity maintenance charge for all accounts where funds have been deposited but activity has not occurred for 1 calendar month and there are no positions held, unless commissions in the preceding 3 months have been $150 or greater.
After 3 months of inactivity DRS Markets will close your trading account and return funds to you subject to charges. If you choose to reactivate your account again we will refund the previous month’s inactivity charge where deducted.
A maintenance margin is the minimum amount of money that must be maintained in a margin account at any time. After an investor has bought securities on margin, the minimum required level of margin is 16.6% (6x leverage) of the total market value of the securities in the margin account. Maintenance margin is also referred to as “minimum maintenance” or “maintenance requirement”.
If the equity in a margin account falls below the maintenance margin, we will issue a margin call ,which requires you to deposit more money into the margin account to bring the level of funds up to the maintenance margin, or liquidate securities in order to fulfil the maintenance amount. DRS Markets reserves the right to sell the securities in a margin account, sometimes without consulting the investor, in order to meet the maintenance margin.
No Stamp Duty
As CFDs don’t involve a physical purchase there is no stamp duty to pay when you open a new position. Any profits from CFD trading are liable to UK Capital Gains Tax, which can be offset against other income in the tax year.
*Please note that securities which are not freely marginable but are supported by our trading platform may require a deposit of additional margin adjusted by DRS Markets on a daily basis to reflect current borrowing and maintenance conditions
CFDs are a leveraged product and carry a high level of risk to your capital as prices may move rapidly against you.
It is possible to lose more than your initial investment and you may be required to make further payments.
You should only speculate with money that you can afford to lose. These products may not be suitable for all customers therefore you must ensure that you understand all the risks involved in trading CFDs
DRS Markets Ltd is Authorised and Regulated by the Financial Conduct Authority No. 744943