Share Financing is a secured revolving credit line backed by cash or shares. Like any debt tool, share financing, if used properly, can boost one’s wealth over time or bring about financial losses. With share financing, you can leverage with cash or capitalise on your idle share asset, such as shares sitting in your Central Depository (or CDP) account, to buy more shares. This minimizes your investment outlay since you do not have to lock up these monies, which may be earmarked for other purposes.
Before trading securities in a share financing account, you should carefully review the share financing agreement provided by OCBC Securities Private Limited (“OSPL”). Consult OSPL regarding any questions or concerns you may have with your margin accounts.
Leverage
Like any leverage products, the contract value traded can be several times greater than the margin funds or collaterals deposited with the broking house. With leverage, it also means that the risk and return are similarly magnified several times.
Margin calls
A decline in the value of securities collateralized in your share financing account may result in margin calls or requests to place additional funds on deposit with the broker to cover the short fall in the margin requirement level to maintain the position. In the case when an investor is unable to put in the additional funds, the broker may close out the position. In addition, the holder will still be liable for any further losses that may have resulted from the position being closed out.
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