Margining Services

Cross Margining

In addition to state-of-the-art clearing and reporting tools, Newedge provides a variety of value-added services expressly designed to meet our customer’s needs. We have developed a portfolio-based margining approach across approved asset classes and instruments to help address our qualified clients’ capital requirements.

Our approach is based on a global portfolio risk estimation process that utilizes a multi-asset  margining tool. By operating a Value-At-Risk (VaR) methodology using a Monte Carlo simulation, we enable our clients to benefit from more efficient use of their capital and we can better understand and accurately asses our clients’ risk.

Contrary to traditional margining methodologies, Newedge offers an approach that combines assets and liabilities in one portfolio. This enables us to calculate the risk of the whole portfolio taking into account all asset classes (equities, forex, interest rates and commodities, which can be cash, OTC or listed derivatives). We then base the collateral requirement (or ‘margin’) on this risk estimation after simulation.

Our reporting services include portfolio valuation, risk assessment and margin calculation.

For example, hedge fund managers who wish to optimize their capital and potentially increase their leverage could use this portfolio risk-based cross-margining approach across asset classes and instruments, resulting in a lower overall margin requirement.

 

Portfolio Margining

Recent rule changes concerning risk-based margining by the Financial Industry Regulatory Authority Inc. (“FINRA”) has allowed Newedge USA to develop a program for portfolio margining of broad-based index options and corresponding exchange-traded funds.

The FINRA rule changes also made provisions for cross margining of these securities with broad-based futures products, which are currently awaiting approval by the CFTC (Commodity Futures Trading Commission).

Newedge USA’s program allows accounts with a minimum of five million dollars in equity much greater margining flexibility. For these portfolio accounts, Newedge USA customers trading broad-based indices and ETFs have a margin requirement of the maximum of the theoretical loss based on a +6.0 percent to -8.0 percent move of the index or ETF.
While customers that qualify for this program must establish or maintain equity levels above five million dollars, all accounts held by a single Newedge USA client and cleared by us may be aggregated for the purpose of meeting the five million dollar requirement.