Margins

About the Wool Futures markets available at ASX 

The ASX Group of companies, includes the combined operations of ASX (formerly the Australian Stock Exchange) and ASX 24 (formerly SFE Corporation).
 
The ASX Group's activities span primary and secondary market services, including capital formation and hedging, trading and price discovery (Australian Securities Exchange); central counterparty risk transfer (ASX Clear); and securities settlement for both the equities and fixed income markets (ASX Settlement Corporation).
 
Effective 1 August 2010, the supervision of trading on Australia’s domestic licensed markets and the supervision of trading participants has been transferred from ASX to ASIC.  ASX Compliance, formerly ASX Markets Supervision, is a wholly owned subsidiary company of ASX which fulfils ASX's oversight obligations as a market operator and clearing and settlement facility operator. 
 
Greasy Wool Futures and Options and Fine Wool Futures are listed on the ASX 24 platform (SYCOM) in accordance with the ASX 24 Operating Rules and ASX Clear (Futures) Operating Rules.
 

Margins

Listed below is Initial Margin information for both markets.

When a Futures contract is traded, the investor does not pay, or receive, the full value of the contract. Instead, both buyers and sellers of Wool Futures contracts pay an Initial Margin, and from trade day until settlement or close-out are liable for daily Variation Margin calls.

How margins are calculated

ASX Clear (Futures) calculates margins using the CME SPAN* margining calculation engine.

The total margin is made up of two components, the initial margin and variation margin.

Initial margin

Both buyers and sellers of futures contracts pay the initial margin, which acts like a deposit. The initial margin represents the maximum probable one-day move in the price of the futures contract. The Clearing House retains the initial margin for as long as the position remains open. Initial margins are met with cash, and earn interest at the overnight cash rate less 0.5%.

Variation margin

The variation margin, or mark to market margin as it is sometimes referred to, represents the market value of the futures contract at the close of trading each day. The variation margin is the difference between the closing price of the futures contract from one day to the next. If the position has moved against the investor, the investor will be required to make a payment to the Clearing House. On the other hand, if the movement is favourable, the investor will be credited by the Clearing House. Variation margins are cash settled daily.

*“’SPAN’ is a registered trademark of Chicago Mercantile Exchange, Inc., used herein under license. Chicago Mercantile Exchange Inc. assumes no liability in connection with the use of SPAN by any person or entity.”