The Research On Futures Company's Differentiated Margin Level Design

Futures margin system is one of the most significant features of futures trading. Its main purpose is to cover the potential loss of default contracts caused by futures price fluctuation in the future, provide buyers and sellers with credit guarantee on the execution of contract, ensure the smooth transactions and avoid default incidents due to sharp fluctuation of price. Since China's future market is still a new market, to effectively control the market risk, the Futures Exchange has been using a strategy- based method by charging a certain percentage of the contract value of investor's total position, disregarding the internal correlations between the contracts. As a member of the Futures Exchange, futures brokerage companies just simply charge an additional percentage over the minimum margin requirement of the Future Exchange. This static and uniform margin system is likely to lead to several problems, such as overcharging, high opportunity cost and inefficient use of money. The price fluctuation risk faced by different style investors'position is different. Operating risk brought by investors from different credit levels also has great difference. This report try to estimate the risk-bearing capacity of futures company's clients base on credit evaluating, analysis of investing behavior and VaR. Then apply suitable margin estimation model to different investing style traders, replace static with dynamic system to trace the risk of traders'position, and adjust the margin level in time. By using the models, futures companies can manage customer's margin level more scientifically, therefore enhance the company's competitiveness and improve its profitability on the premise that the risk is under control.