The collateral account is the account where initial collateral and margin calls must be paid when clients trade forward contracts.
Initial collateral and margin calls are meant to cover any negative exposure of a forward contract. Funds paid to the collateral account are locked to ensure clients can honor the forward contract on the maturity date.
Initial collateral and margin calls are only temporarly paid to the collateral account and can be withdrawn on the maturity date.
The collateral account is built around 6 blocks:
- Account balance and collateral details
- Coverage ratio and margin calls
- Collateral settings
- Collateral details
- Trade details
- Collateral account transactions
Account balance and collateral details
Account balance can be broken down in three:
- Collateral account balance is the balance of the collateral account
- Locked balance is the balance locked to pay for initial collateral requested as well as margin calls, if any
- Available balance is the balance that can is in excess of the locked balance and can be withdrawn from the collateral account
Collateral details can be broken down in two:
- Initial collateral to pay
- Margin calls to pay
Sum of initial collateral to pay and margin calls to pay is the total amount to be credited to the collateral account.
Coverage ratio and margin calls
Current coverage ratio is equal to the client's coverage divided by the client's net positions.
Coverage is the sum of collateral account balance plus mark-to-market plus collateral exemption, if any.
Net positions details can be found in the Collateral details table.
Displays collateral settings that apply to the client, including:
- Initial collateral rates depending on contract maturity
- Collateral exemption, if applicable
Collateral details table displays the applicable initial collateral. Initial collateral is calculated based on net positions for each maturity date as well as the corresponding initial collateral %.
Trade details table displays the mark-to-market for each forward contract. Mark-to-market is the difference between the contract value at client rate and the contract value at market rate.
Collateral account transactions
Collatearl account transactions table displays the debits and credits on the collateral account.