IG Index margin change for spreadbets

I just read a message from IG Index warning that, from the quarterly rollovers on 16 December, it will alter margin requirements. Instead of margin being calculated on the opening price for a bet, it will alter based on the midprice in the market. Hence, margin on open bets will increase as share prices increase.

This is a MUCH more rational approach than their previous policy, and I wouldn’t be at all surprised if they haven’t done it as a result of user feedback.

I found myself irritated by the existing policy earlier in the year:

If you buy a share a 100p with a 25% margin and it subsequently falls to 40p – the fact that you were still required to put up 25p margin as well as fund the 60p loses can be more than a little annoying.

On one occasion I did actually revert to selling and re-opening to get a proper margin (eg 40p * 0.25 = 10p rather than 25p).

Maybe the fact that they have finally made this change at or near (maybe – lets not have that discussion again, for now!) the bottom may indicate that they are looking after themselves rather than their clients.

Of course this also means that this is less beneficial for clients in a rising market. It’s hardly unreasonable though and indeed it ‘enforces’ a (limited) degree of prudence in investors.

If you buy a share at 40p lets say at 10% margin (4p) is it really reasonable to expect if the price rises to 100p that one should still only have a margin requirement of 4p (effectively 4%)? I don’t think so, and it strikes me as a welcome (if overdue) change.

Tags: IG Index, margin, rollover

This entry was posted on Wednesday, January 7th, 2009 at 11:15 pm and is filed under Industry Happenings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.