Frequently Asked Questions - Margin Facility

FAQs - Margin Facility
  • Individuals 21 years and above or Corporations who are existing On- Line clients of ABCSI.
  • You need to open an ABCSI Margin Account by accomplishing the "Margin Trading Agreement" (click here to download a copy) and submit 3 copies of the duly accomplished Margin Facility Agreement to AB Capital Securities, Inc. at Units 1401-1403 14th Flr. Tower One & Exchange Plaza, Ayala Triangle, Ayala Avenue, Makati City.
  • Make sure that you meet the "Initial Equity Requirement" of at least Php200,000, which can be in the form of cash, stocks, or a combination of both cash and stocks
  • Credit Limit per Customer not exceeding Php 1,000,000.00
  • Note that, aside from cash, only stocks that are eligible as collateral, called "Marginable Stocks", can form part of the initial equity.
  • You will receive a notification thru email from AB Capital Securities once your application for a Margin Account is approved.
  • Margin trading requires an investor to be extra vigilant in monitoring his/ her margin account portfolio to ensure that the margin does not fall below the required level especially during periods of enhanced volatility.
  • Use margin for a basket of stocks because it reduces the odds of a margin call triggered by a major decline in one stock.
  • Assess to ensure that trading on margin is appropriate to your financial circumstances risk tolerance and financial objectives.
  • Use margin for opportunity (short -term) trading because interest costs on margin debt can add up to a substantial amount and make a major dent on your profits.
  • Do not leverage to the hilt. Borrow less than the maximum amount allowable in your account to avoid the risk of a margin call.
  • The interest rate is 1.25 % per month + 12% VAT, which is subject to change without prior notice.
  • The amount of interest that you have to pay is calculated and accumulated daily based on the balance of the loan amount at the end of the day.
  • ABCSI debits the interest charges to your account at the end of each month.
  • You should monitor your account carefully to stay informed of the amount of interest you are being charged for your margin loan. Interest expense on a margin loan can materially reduce the rate of return on your investment.
  • Maximum of one (1) year, renewable through written advice
  • Note that interest charges accumulate over time as long as the loan is outstanding.
  • Margin Trading can amplify gains as well as losses.
  • While buying on margin can potentially pump up your profits and boost your purchasing power, utilizing it comes with very steep risks. If portfolio value falls considerably, you may have to deal with margin calls, additional equity might be demanded on short notice or else face a forced liquidation. Once stocks are sold after prices have plummeted, you’ve lost out on the chance to recoup your losses.
  • Marginable Stocks are those that ABCSI accepts as collateral for the amount borrowed under the Margin Account. (See Annex "A" for list of Marginable Stocks and corresponding Margin Ratings)
  • Note that only Marginable Stocks can be:
    • Included to form part of initial and subsequent minimum equity requirement
    • Used as collateral or security for the amount borrowed
    • Bought using additional funds borrowed from ABCSI
    • Note that ABCSI reserves the right to add/remove stocks from the list should they fail to meet the criteria to be eligible as Marginable Stocks.
  • When you receive a "Margin Call", you will be required to bring your equity back above the 50% minimum requirement within 5 trading days.
  • You can bring your equity back above the 50% minimum requirement by:
    • Depositing sufficient cash into your account
    • Selling sufficient stocks to pay down the loan
    • Infusing more marginable stocks in your account
  • If you fail to restore equity above the minimum requirement, ABCSI will sell stocks in your account sufficient to cover the deficiency. If your stocks are sold off after prices have plunged, then your losses are locked in and you lose your chance to participate in any future rebounds that may take place.
  • If your equity falls below the minimum maintenance requirement of 50%, your ability to purchase more stocks is halted up until this purchase can be raised back to at least 50%.
  • Let us say that the aggregate (based on our margin ratings) market value of stock is Php 900,000 and outstanding margin balance is at Php 600,000, your equity is 33.33 % (Php 900,000 -600,000 / Php 900,000). Since it is below the 50 % threshold, a margin call will be issued.
  • Once your equity level falls below 30%, your margin trading privileges shall automatically be suspended. If your margin account is suspended, sufficient amount of stocks will be sold to pay off your loan and your account is then converted into a regular Cash Account.
  • In case the proceeds from the sale of the securities in your account are not sufficient to fully cover the loan, you remain personally liable for the loan balance, as well as for any cost incurred in collecting that amount.
  • The purpose of the ABCSI   Margin Account is to provide funding access to stock market investors
  • Buying on margin involves getting a loan from ABCSI and utilizing the money from the loan to invest in more securities (listed in the Philippine Stock Exchange)

In a Cash Account, you can only purchase stocks limited by the cash balance you have in your account. With a margin account, ABCSI will provide you a credit facility/ funding to buy stocks as long as you meet the requirements and you have marginable stocks in your portfolio as collateral or security for the amount you would like to borrow.

  • To keep your credit line open, your equity must be at least 50% (200% Collateral requirement) of the value of the marginable stocks in your portfolio.
  • Equity is the value of marginable stocks in your portfolio minus the outstanding loan balance.
  • In no event shall new or additional credit be extended in account in which equity is less than P 50,000
  • This means that if you have P1 million worth of stocks in your account, your loan balance should not exceed P500,000
  • Sometimes, the value of your equity falls especially when the market price of the collateral declines. In this case, if your equity falls below 50%, then you will receive a "Margin Call".