How to manage Margin Calls

You are responsible for monitoring your Margin Calls. Keeping track of your margin loan and planning an appropriate personal investment strategy will help you minimise the risk of a Margin Call.

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.
  • Loan Limit – this is the maximum gearing level (amount you can borrow) based on Loan to Value ratios (LVRs) assigned to each security in the loan portfolio.
  • Buffer - amount by which BT may allow to exceed your loan limit to facilitate for small fluctuations in the market.
  • Margin Call- If your loan balance exceeds the loan limit by more than the buffer, you are in a Margin Call.
  • Interest payments due – ensure your monthly variable interest payment does not take you over your loan 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) 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.

What happens in the event of a Margin Call?

When you are in a Margin Call, you are required to take immediate action to restore your loan balance to your loan limit. 

Restoring your loan balance to your loan limit

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

  1. Repay some or all of your loan balance;
  2. Lodge additional securities acceptable to BT;
  3. Sell or redeem some or all of the 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 sell enough securities to restore your loan balance to your loan limit or all of your securities to recover the total loan balance, at its discretion. 

How you can apply a Transaction Simulator to avoid a Margin Call

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

Outlined below is an example of a margin loan Transaction Simulator. In this example the portfolio has a market value of $100,000 and a total loan valuation ratio (LVR) of 70%.

To apply the Transaction Simulator to your own portfolio, simply visit Margin Calls information on the BT website.

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 Valuation Ratio (LVR)
Percentage BT will lend you based on the individual security		 70%
Loan 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 loan limit)		 10% x $100,000 = $10,000
Loan balance
The amount of borrowed funds		 $70,000
Market value drops by 13%
New portfolio market value		 $87,000 (loan limit $60,900)
Margin Call
Loan balance is greater than the loan limit plus the buffer		 $70,000 > $60,900+ $8,700 = $69,600
Outcome
In this simulation example, the portfolio is in Margin Call. A payment of $9,100 is required in a Margin Call situation.

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

margin calls

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
  • Visit www.bt.com.au/marginlending

 

BT Margin Loan is offered by BT Securities Limited ABN 84 000 720 114, AFSL 233722 (BT Margin Lending)

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 relate to” Margin Calls” and “Defaults ” have been detailed in the BT Margin Loan Application booklet including BT Margin Loan Facility Deed and Risk Disclosure statement and you must read BT Margin Loan Application booklet without relying only on the information on this page. A significant market fall is a Default and not a Margin call and BT has a right to sell your securities at its discretion without any notice to you.

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.