The following provides an example of how currency margins are calculated.
Margin for Trading Example
Assume base currency is USD for the below example
1. Determine the base-currency equivalent of net liq values in the account
NetLiq USD Equivalent
EUR: -14,362.69 -19,712.723
KRW: 6,692,613.37 5032.04
USD: 15,073.07 15,073.07
Using exchange rates as follows
EUR USD 0.72860
KRW USD 1330.00000
2. Determine the haircut rates for each currency pair
HairCut Rates
USD EUR .025
USD KRW .10
EUR KRW .10
3. Determine the largest negative currency balance
4. Sort the haircut rates from smallest to largest
EUR USD 0.025
EUR KRW 0.10
5. Starting with the positive net liq base-currency equivalent with the lowest haircut rate, calculate the margin requirement on that portion which may be used to off-set the negative net liq value
Consume 15,073.07 USD equivalent against the EUR
Margin1 = (15,073.07) x 0.025 = 376.82
6. Repeat step (5) until all negative net liq values have been covered
Remaining negative net liq
-19,712.723 + 15,073.07 = -4,639.65
Consume remaining negative net liq with 4,639.65 USD equivalent of KRW
Margin2 = (4,639.65) x 0.10 = 463.97
Remaining negative net liq
-4,639.65 + 4,639.65 = 0.00
Total margin requirement = Margin1 + Margin2 = 376.82 + 463.97 = 840.79