Liquidation Example

A retail client with £10,000 in their account has decided to open a new, long position on the UK100 market of £20/point at a price of 7250.

The margin rate for a retail client trading this market is 5% of the notional value of the position. In this case, the margin requirement to hold the position is 5% of 20 x 7250, which is £7,250.
The clients trading resources (spare cash in the account not held up by margin or any losses) would be £2,750. If this ever fell below £0, the client would be in ‘margin call’.

The market has fallen in price and is now trading at 6931. The client is losing £20 for every point the market is lower than their entry price therefore, their profit/loss on the position is -£6,380 and their account valuation falling from £10,000 to £3,620.

Retail clients are liquidated when their account valuation reaches 50% or below of their margin requirement. In this example, lets assume that the margin required does not change with the value of the UK100 and remains a constant £7250 – if the client experiences losses on their position, enough to bring their account valuation down to £3625 or below, their position will be forced closed at the next available price on the market.
Due to the market falling 319 points, and the client suffering a loss of £6,380, their account valuation has fallen below 50% of their margin requirement and so the position has been forced closed (liquidated).

A spread-bet account with multiple positions on a variety of markets will have their positions closed in order of highest to lowest margin requirement, until the account is no longer in margin call. Spread-bet positions are closed in their entirety, there are no partial liquidations. Where a market is currently out of hours (not open for trading), the liquidation process will skip these positions and close any positions on markets that are in trading hours.

Liquidations of positions will continue until a clients account is no longer in margin call (negative trading resources). If a client is still in margin call and their only remaining position cannot be closed due to the market not being in trading hours, the liquidation will occur at market open, depending on the opening price of that market. If in the scenario that a client with 5 open positions has come for liquidation, but after the first three are forced closed they come out of margin call, the 2 remaining positions will stay on the account.

A retail client with £10,000 in their account has decided to open a new, long position on easyJet of 8000 CFD at a price of 530.

The margin rate for a retail client trading this market is 20% of the notional value of the position. In this case, the margin requirement to hold the position is 20% of 8000 x 530 x 0.01 as the value of this stock is trading in pence, which is £8,480.

The clients trading resources (spare cash in the account not held up by margin or any losses) would be £1,520. If this ever fell below £0, the client would be in ‘margin call’.
The market has fallen in price and is now trading at 458. The client is losing £80.80 for every point the market is lower than their entry therefore, their profit/loss on the position is -£5,760.80 and their account valuation falling from £10,000 to £4,239.20.

Retail clients are liquidated when their account valuation reaches 50% or below of their margin requirement. In this example, lets assume that the margin required does not change with the value of easyJet and remains a constant £8,480 – if the client experiences losses on their position, enough to bring their account valuation down to £4,239.20 or below, their position will be forced closed at the next available price on the market.

Due to the market falling 72points, and the client suffering a loss of £5,760.80, their account valuation has fallen below 50% of their margin requirement and so the position has been forced closed (liquidated).

A CFD account with multiple positions on a variety of markets will have their positions closed in order of highest to lowest margin, until they are no longer in margin call. The final position may be partially closed to bring the account out of margin call. Where a market is currently out of hours, the liquidation process will skip these positions and close any positions on markets that are in trading hours.

Liquidations of positions will continue until a clients account is no longer in margin call (negative trading resources). If a client is still in margin call and their only remaining position cannot be closed due to the market not being in trading hours, the liquidation will occur at market open, depending on the opening price of that market. If in the scenario that a client with 5 open positions has come for liquidation, but after the first 2 are forced closed only 2.5 of the remaining 3 positions need closing, the 2.5 remaining positions will stay on the account.