*Please note, FX Forward margin will be applicable from 29 January 2020.
FX forward margin is a margin requirement on the interest rate risk inherent in FX forwards and FX swaps.
The interest rate margin requirement is applied in addition to the standard margin requirement applied to FX spot instruments on the notional exposure.
The calculation has the following characteristics:
- Interest rate margin requirement is calculated per currency pair
- The interest rate differential is shifted by 1% and then scaled by time to maturity
- All currency pairs use the same shift of 1%
- Netting across value dates in currency pair
- 1M EURUSD forward with value date in 3 months.
- Forward price = 1.1120
1M x 1.1120 x 3/12 x 1% = 2,700 USD
2,700 USD is applied in addition to the standard margin requirement. Assuming that is 2% in EURUSD:
20,000 USD + 2,700 USD = 22,700 USD
The margin requirement is calculated in the 2nd currency, and then converted into the base currency of the account.