As of August 1st 2018 The European Securities and Markets Authority (ESMA) have introduced a 50% close out rule. BUX must adhere to this rule.
When your total account value drops below 50% of your initial invested amount, your worst position will be closed in order to bring your Margin back to over 50%**. Say that your initial invested Amount is £1,000. Now, if your total account value drops to £500, your worst position will be closed so that your Margin can go back to over 50%. You can always check your Margin or 'Trading capacity' in your Cash screen.
You can keep an eye on your Margin or 'Trading Capacity' via the 'cash' tab in the app:
When you see your Margin or 'Trading Capacity' getting close to 50%, you can take a couple of steps to prevent your worst positions from being closed automatically:
- Close a position yourself
- Add funds to your account to increase your margin.
To calculate your trading capacity (a.k.a. Margin), the applied formula is as follows:
(Total account value) ÷ (total invested amount)
The 'total account value' is the value of your entire account. You can find this value in the top right corner of the screen.
The 'total invested amount' is the total sum that you have initially* invested in all current open positions, excluding the Multiplier.
To illustrate this with an example: say you deposit £1,000 and invest £400 in Facebook which then drops by 50%. At this point, your total account value is £600 (cash) plus £400 (invested amount) minus £200 (your loss).
Your Trading Capacity will be:
(600 + 400 - 200) ÷ (400) = (800 ÷ 400) = 2.0 which is 200%.
*If you use a flexible Multiplier to change the invested amount, the margin is calculated based on the initial amount and not on the invested amount after the change.
Should you have any further questions regarding how the Margin is calculated, please contact us at email@example.com.
** Sometimes there is a delay in the liquidation of one of your positions if you have exceeded below the 50% trading margin. However, we will always close a position after exceeding below the 50% trading margin, but this happens manually, so can be delayed a few minutes. Therefore, you might witness a trading margin temporarily under 50%. Do note however, that regardless of this delay, the position that will be closed will always be closed at the price at the time of exceeding below 50% trading margin.