IG Index Lowers Deposits on 900 Blue-Chip Shares
September 19, 2009Andy No Comments »From 21 September, IG Index have announced that they will be cutting their deposits on a range of FTSE 100 and major global shares, with many starting at just 5%.
As a result, clients will benefit from:
- Lower deposit requirements on 900 blue-chip shares across the world’s major stock indices.
- Over 650 major global shares available at a deposit rate from only 5%.
Please see the Tiered Deposits section below for a full explanation of how the system works in practice.
What are Tiered Deposits?
Tiered Deposits enable IG Index to offer you deposit rates that reflect the size of your aggregate position [1] in a particular share. This means that most spread betting positions will attract IG’s lowest deposit rates, reflecting the liquidity of the market at smaller deal sizes. A spokesman at IG Index, however commented that larger positions may still require a higher deposit, as it is more difficult to trade out of these positions quickly.
How does it work?
Your initial deposit will be determined using a table of four incremental tiers. The deposit rate will increase progressively as your aggregate position[1] moves up from one tier to the next. However, only the portion of your position that falls into a higher tier will be subject to its increased deposit rate.
The range of the four tiers differs to suit each market, and the deposit rate varies according to the type of account you hold.
Example: Tiered Deposits for HSBC Shares
The table below shows how Tiered Deposits apply to HSBC shares.
| Tier 1 | Tier 2 | Tier 3 | Tier 4 | |
|---|---|---|---|---|
| Position size (£ per point [2]) | Up to £1500 | £1501-9000 | £9001-300,000 | £300,000+ |
| Deposit rate (Plus Account) | 5% | 20% | 40% | 90% |
| Deposit rate (Select Account) | 5% | 10% | 25% | 90% |
As a Plus or Select Account holder, if you hold a position of £500 per point in daily HSBC, your initial deposit will be 5%.
If you are a Plus Account holder with a £2000 per point position in HSBC your initial deposit will be determined as follows:
- £1500 at 5% (Tier 1)
- £500 at 20% (Tier 2)
This equates to a weighted average deposit rate of 8.75%, still lower than our old deposit rate of 10% and significantly lower than the outlay required for an equivalent share purchase in the underlying market.
Reducing your deposit requirement
You can benefit from deposit reductions when you use non-guaranteed stops, as long as your aggregate position falls exclusively within the range of the first tier. Please note, however, that any Tier 1 deposit reductions will be lost if you increase your aggregate position beyond the threshold of Tier 2.
So, if you have a £1300 per point position in HSBC and a tight non-guaranteed stop, but decide to add another £300 per point to your position, you may see a substantial increase in your deposit requirement.
More information
A full list of affected shares and their applicable deposit tiers can be found below.
Tiered Deposits List (172KB) [pdf]
From 21 September 2009 you will be able to see the Tiered Deposit requirements for each share on the PureDeal platform. Simply use the Get Info option on the dropdown menu for the market concerned.
Alternatively, if you would like us to calculate the deposit requirement for a given position, please call our Client Services Team who will be happy to advise.
Remember that the size of your overall position, and not the level of the initial deposit, dictates your profit and loss. It is possible for losses to exceed your initial deposit.
Points to note:
1. For the purposes of Tiered Depositing, your aggregate position includes your non-Controlled Risk open positions and orders to open.
2. Within our PureDeal platform, margin tiers will be expressed as an amount per point of the share’s base currency, irrespective of the currency or denomination of your bet. For example, US shares will be expressed in terms of dollars per point.
Tags: deposit rates for shares, ig, IG Index, igindex, margins, spread betting
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