What is the interest rate of using margin?

1. Financing rates and interest

1.1 Interest calculation method

1.1.1 Interest rates and settlement rules

The annualized interest rate on the financing is 6.8% and the financing rate may be adjusted periodically to accommodate changes in currency exchange rates. From the date of settlement of the shares (inclusive) until repayment, interest ceases to accrue, accrues on natural days, and is deducted at the end of the month (interest is charged for overnight positions and not for intraday repayments).

1.1.2 Financing Interest Formula 

Single natural day financing interest = interest-bearing amount * 6.8% / 365, minimum charge HK$0.01.

Example: A customer's account settlement amount is 0, financing 50,000 to buy 00700, on T day and T+1 day, the account settlement amount will be 0, after the settlement on T+2 day, the account settlement amount will be -50,000, then interest starts to accrue.

Note: While you have a short position, it is possible that you still have an interest-bearing amount when your cash balance is not negative.

After you sell the loaned bond, the cash flow generated by the short sale may make up for the cash balance which was originally negative. We will calculate the financing interest based on the original cash balance.

Example:Assume that your account has HK$-1,000 cash balance and no short positions.

After the short-sale operation, the cash balance increased to HK$4,000, and the market value of the short position was HK$5,000. We use cash to offset the market value of short positions, and still calculate financing interest based on a base of HK$ -1,000

1.2 Methods of repayment

There are two ways to repay the arrears:

1.2.1 Selling Shares: The funds obtained from the sale of shares will be settled on T+2, so on T and T+1 after the sale of shares, the account will still be in arrears and you will be charged interest.

1.2.2 Deposits: The Client's deposits will repay the arrears first, you will not be charged interest after you repay the debit.


2. Short rates and interest

2.1 Interest calculation method

2.1.1 short rates and settlement rules

The financing involves an annualized interest rate of 365 days per year, which is charged on a natural day basis from the settlement date of the shares to the end of the repurchase and settlement date, and is deducted at the end of the month (interest is charged for overnight positions held and not for intra-day coupon repayments).

2.1.2 How the short rate is calculated

The short rate is generally related to the risk level of the stock, its liquidity in the market, the shorting ratio (the ratio of the number of loans available to the total number), and other factors, and is not a fixed value.

The short rate may fluctuate from time to time depending on the underlying, date, and moment. The daily interest rate is determined at the moment of settlement and can be checked through the daily statement.

2.1.3 Financing Interest Formula

Single natural day interest of short selling = interest-bearing amount * short rate / 365, minimum charge HK$0.01. 

Interest-bearing amount= Settlement Price * Number of shares

2.2 The Method to Return stocks

2.2.1 Buy stocks: When you buy back the short positions, the stocks will be settled on T+2. Before the settlement on T+2, you still will be charged interest on T and T+1.

2.2.2 Stocks Transfer : You can transfer more stocks than your short positions to return stocks.