How to manage Margin Calls

You can monitor your BT Margin Loan status online by logging into BT Online at any time to keep a check on the following:

• Loan balance – the amount you have borrowed (excluding interest).
  
• Total Market Value – the total value of your loan portfolio.
  
• Borrowing Limit – this is the sum of your investment's market value multiplied by the Loan to Value Ratio (LVR) assigned to each security in the loan portfolio.
  
• Buffer - is the amount by which BT may permit you to exceed your borrowing limit to allow for small fluctuations in the market.
  
• Margin Call - if your loan balance exceeds the borrowing limit by more than the buffer, you are in margin call.
  
• Interest payments due – ensure your monthly variable interest does not take your loan balance over your borrowing limit.
  
• Trades pending - a fall in the market between the time you place an order for a trade and the settlement of that trade, could mean the trade does not settle because you have insufficient funds available.

Note: The Loan to Value Ratio (LVR) or buffer assigned to any security may change - it may even be reduced to zero. This can result in a Margin Call or the cancellation of transactions.

How will you know your loan is in a Margin Call?

• You are responsible for monitoring whether the loan balance exceeds the borrowing limit by more than the buffer at any time and ensuring that a margin call does not occur.
• If your facility is in margin call, we will endeavour to contact you and/or your agreed margin call contact by your preferred contact method. You should ensure that you are in a position to receive any communication from us.
• To assist you in managing your margin loan, BT provides an electronic notices service. If you register to receive electronic notices, we will attempt to contact you via email and/or SMS when your BT Margin Loan balance exceeds 50% of your buffer or your loan goes into a margin call.
• If you are not registered for electronic notices, BT will attempt to notify you of any margin calls via telephone on the contact number you have provided and/or send margin call notices by mail.
• You are responsible for keeping your margin call contact details up to date.

How can you register for electronic notices?

• Complete this form to register for electronic notices to help you manage your margin loan position. Register for Electronic Margin Call Notices (PDF 596KB)

Restoring your loan balance to your borrowing limit

If your loan goes into a margin call position, you will need to restore your loan balance to your borrowing limit or below in accordance with your facility terms. You will be required to do this by 2.00pm (Sydney time) on the second business day. Unless your facility terms provide otherwise, it will not be acceptable to return the loan balance into the buffer.

For example, if a margin call is triggered on Monday, you will need to satisfy the margin call by 2:00pm the following Wednesday.

You must do one or more of the following to restore the loan balance to your borrowing limit or below. These include:

• Repay some or all of your loan balance;
• Lodge additional securities acceptable to BT;
• Sell or redeem some or all of the security portfolio and use the proceeds to reduce your loan balance.

What happens if you fail to rectify a Margin Call

Failure to rectify a Margin Call will result in you being in default and BT may terminate your loan, sell your securities or take other action to rectify the default. When BT sells your securities, BT may at its discretion, either sell enough securities to restore your loan balance to your borrowing limit or may sell all of your securities to recover the total loan balance. 

How is the buffer set?

A buffer ensures that small falls in the market don't result in a margin call.

The size of the buffer varies with different margin lenders. With BT Margin Lending, the buffer is currently 10% of the total value of approved securities in your loan portfolio but is subject to change at any time.

How you can use a Transaction Simulator to assist managing your margin loan

During periods of market volatility it’s important to understand the factors behind how Margin Calls are calculated, so you can more effectively manage your own portfolio.

In this example the portfolio has a market value of $100,000 and a total loan to value ratio (LVR of 70%).

Log into your BT Margin Loan account to use the Transaction Simulator.

Margin Loan Transactions	Calculation
Portfolio Market Value Total value of all security lodged on the margin loan at current market pricing	$100,000
Loan to Value Ratio (LVR) Percentage BT will lend you based on the individual security	70%
Borrowing Limit Portfolio value x LVR% (the maximum amount you can borrow)	$100,000 x 70% = $70,000
Buffer 10% of portfolio market value (this is in addition to the borrowing limit)	$100,000 x 10% = $10,000
Loan Balance The amount you have borrowed	$70,000
Market value drops by 13% New portfolio market value New borrowing limit Loan balance exceeds the Borrowing Limit by Buffer available	$87,000 $60,900 $9,100 $6,090
Loan balance exceeds the buffer by:	$3,010
Outcome In this example, the portfolio is in Margin Call. A payment of $9,100 is required to restore the loan balance to the borrowing limit.

The chart below provides a graphical illustration of the Transaction Simulator example above.

The example above is for illustrative purposes only and cannot be relied upon as an indicator of future results.

For more information
Call BT Margin Lending Customer Relations on 1800 816 222 - have your Client Code ready when you call. The BT Margin Loan is offered by BT Securities Limited ABN 84 000 720 114, AFSL 233722 (BT Margin Lending) the issuer of the BT Margin Lending Margin Loan Product Disclosure Statement and Financial Services Guide. These documents can be located here.The information available on this page is for general advice and education only and should not be considered as a comprehensive statement on Margin calls or on any matter. All terms and conditions relating to "Margin Calls" and "Defaults" are set out in the BT Margin Lending Facility Agreement. To the extent of any wording inconsistency, the wording in the Margin Lending Facility Agreement prevails.

Whilst the projections, examples given on this page are predicative in character, every effort has been taken to ensure that the assumptions, on which the projections are based, are reasonable. The projections may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately may differ from these projections.
The information on this page has been prepared also without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. Before borrowing to invest, BT Margin Lending recommends that you seek professional financial, tax and legal advice determine its appropriateness to your objectives, financial situation and needs.