About the Wool Futures markets available at ASX
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.
- ASX 24 Wool Futures Margin Information (PDF 130KB)
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.
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%.
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.”