MARGIN TRADING FACILITY - FAQs

What is the FirstMetroSec Margin Account? 

The Margin Account enables you to increase your buying power by allowing you to borrow additional funds from FirstMetroSec using qualified stocks (called ‘marginable securities’) in your account as collateral. Interest is charged on any borrowed funds during the period that the loan is outstanding.

 
How does the FirstMetroSec Margin Account differ from a regular Cash Account?

With a Cash Account, you can only buy stocks with available cash in your account. With a Margin Account, you can buy more stocks even if you do not have cash left by borrowing additional funds from FirstMetroSec.

 
How can I have a FirstMetroSec Margin Account?

Apply for a Margin Account by submitting a soft copy of the signed required documents via e-mail to [email protected].

Eligibility Requirements:

1. Must be at least 21 years old but not more than 75 years old
2. Minimum gross annual income of P1Million
3. Credit rating must be "Acceptable"
4. With P200,000 cash and/or marginable securities

Documentary/KYC Requirements:

1. For new customers:

• Margin Account Application Form
• Margin Trading Account Agreement
• Client Suitability Assessment
• Margin Risk Disclosure Statement
• Latest Income Tax Return (with BIR or Bank Stamp) or 3 months original payslip or any other acceptable proof of income or net worth.
• Letter of Authorization - CIBI 

2. Additional for existing customers:

• Updated CAIF and Margin Trading Agreements if more than 2 years old

Note: All documents should be physically signed. Download forms HERE.


What shares can I pledge as collateral in a Margin Account? 

Marginable Securities are securities approved by FirstMetroSec to be used as collateral in a Margin Account.

As of September 2023, the following are considered Marginable Securities:

Margin Rating determines the amount of money that can be borrowed based on the stock’s market value. A stock with a margin rating of 80% means that the investor can borrow additional funds of up to 80% of the stock’s market value (this amount is referred to as the stock’s Collateral Value). Non-marginable stocks have zero margin rating and collateral value.

Note that FirstMetroSec reserves the right to add/remove securities from the list and change the margin rating at any time in its sole and absolute discretion.
 

How much can I borrow? 

The funds you can borrow depend on the amount of Equity you have in your account.
 
Equity is the total collateral value of stocks and cash in your account minus any outstanding loan balance. Non-marginable stocks have zero collateral value.
 
You can borrow to invest up to 100% of the value of equity in your account up to a maximum initial credit limit of P10 million. 
 
If you want to request for an increase in credit limit, send an email to [email protected].
 
A margin account effectively doubles your buying power by allowing you to pay only half the cost of your stock purchase and letting you borrow the rest.
 
Here are some examples:

• A P100,000 cash contribution increases the buying power by the same amount. This will allow the investor to purchase up to P200,000 worth of marginable securities.

• A margin account with P100,000 marginable security has an equity of P100,000. The investor may borrow up to P100,000 to invest in marginable securities.

• A margin account with P50,000 marginable security and P25,000 non-marginable security has an equity of P50,000.  Non-marginable securities have zero collateral value. The investor may borrow up to P50,000 to invest in marginable securities.

• A margin account with P50,000 marginable security, P25,000 non-marginable security and P10,000 loan has an equity of P40,000. Non-marginable securities have zero collateral value and equity is reduced by borrowings. The investors may borrow up to P40,000 to invest in marginable securities.

The platform computes and displays the amount you can borrow in a margin account, so you don’t have to worry about the computation.
 

How much does First Metro Sec charge as interest on the amount borrowed?

Interest is 0.9% per month plus VAT, accrued daily based on the balance of the loan amount at the end of the day. 
 
FirstMetroSec deducts the interest charges from your account at the end of each month.
 
Interest rate is subject to change without prior notice. 
 
Please review your billing statements carefully to stay informed of the amount of interest you are paying for your margin loan. Interest expense on a margin loan can materially reduce the rate of return on your investment.  


Is there a period within which I should pay the amount borrowed?

None. The borrowed amount can be kept for as long as you want. Note that interest charges accumulate over time while the loan is outstanding. When a stock is sold, the proceeds are used to pay the outstanding loan balance first.  
 

How do I maintain good credit standing with FirstMetroSec?

To maintain good credit standing, you must keep your Equity above minimum thresholds.
 
Equity is the total collateral value of stocks and cash in your account minus any outstanding loan balance. Non-marginable stocks have zero collateral value.
 
The minimum requirements are:

• Your Equity Percentage, which is calculated as Equity divided by the Current Market Value (CMV) of Securities in your account, must be at least 50%.

• Your equity must also not go below P50,000

Here are some examples:

• A margin account with P100,000 marginable security with no debt has an equity percentage of 100% (Equity Percentage = P100,000 ÷ P100,000).

• A margin account with P50,000 marginable security, P25,000 non-marginable security and no debt has an equity percentage of 100%.  Non-marginable securities have zero collateral value. (Equity Percentage = P50,000 ÷ P50,000).

• A margin account with P50,000 marginable security, P25,000 non-marginable security and P10,000 loan has an equity percentage of 80%.  Non-marginable securities have zero collateral value and loan reduces equity. [Equity Percentage = (P50,000 – P10,000) ÷ P50,000].

• A margin account with P50,000 marginable security, P25,000 non-marginable security and P40,000 loan has an equity percentage of 20%.  Non-marginable securities have zero collateral value and loan reduces equity.  The higher the loan amount, the lower the equity percentage. [Equity Percentage = (P50,000 – P40,000) ÷ P50,000]

A decline in the market price of your marginable securities may cause your equity to fall below minimum thresholds, so regularly monitor your account.
 
If your equity falls below these levels, you will receive either a “Margin Alert”, “Margin Call” or “Margin Suspension”.  

The platform computes and displays your equity percentage, so you don’t have to worry about the computation.
 

What is a Margin Alert?

A Margin Alert (LEVEL 01) is triggered when your equity percentage falls below the minimum equity percentage of 50% or minimum equity amount of P50,000.
 
At this point, you will not be allowed to borrow additional funds until you restore your equity numbers above these levels by adding cash or selling enough stocks to reduce your loan.  


What is a Margin Call? 

A Margin Call (LEVEL 02) is triggered when your equity percentage falls below 40%. 
 
At this level, you must add cash or sell enough stocks in your account to bring your equity percentage back to 50% within 5 trading days. 
 
If you fail to meet our Margin Call, we may sell enough stocks in your account on your behalf at our sole and absolute discretion to cover the balance.


What is a Margin Suspension?

A margin suspension (LEVEL 03) is imposed once your equity percentage falls below 30%.
 
If you are hit by a margin suspension, enough stocks in your account will be sold to pay off your loan at our sole and absolute discretion. 
 
In case the proceeds of the sale are not enough to settle the loan in full, you remain liable for the balance, as well as for any cost incurred in collecting that amount.  
 
Your account will also be converted into a regular Cash Account.


Can I buy non-marginable securities in a margin account? 

Yes, you may now use your available cash or your Excess Equity. A margin account with zero cash but excess equity may use this amount to buy non-marginable securities. Excess Equity is the amount of equity in the account which exceeds the minimum 50% equity requirement.

We updated our system so that you do not have to withdraw your excess equity and transfer to a separate cash account to trade non-marginable securities. Basically, you now only need one account for both Marginable and Non-marginable securities!


What are the risks of having the FirstMetroSec Margin Account?

Margin Trading is a double-edged sword. While gains are amplified in bull markets, substantial losses can mount quickly in bear markets. If the value of marginable stocks in your account falls considerably, you might get a margin call where we’ll ask you to add cash or sell stocks on short notice. Failure to comply will cause forced sale of securities. Once stocks are sold after prices have plummeted, you’ve lost out on the chance to recoup your losses.  


How do you protect yourself from the risks associated with having a FirstMetroSec Margin Trading account?

Buying stocks on margin is risky, especially for investors that are new to the concept.
 
To protect yourself, here are the things you need to do:

• Understand what happens if the price of the securities purchased on margin declines.

• Know that you are charged interest for borrowing money and that will affect the total return on your investments.

• Be aware that not all stocks can be used as margin or security for the loan

• Remember that we can remove securities from the list of marginable securities and reduce the margin rating at any time in our sole and absolute discretion.

• Ensure that trading on margin is appropriate for you in light of your investment objectives, risk management parameters, and personal circumstances.

How can I manage risk?

• Diversify

  • Diversify your portfolio to reduce your exposure to the price movements of any single activity

• Monitor your loan

  • Monitor your portfolio regularly to make sure you don’t fall below the required equity level

• Check your suitability

  • Make sure your investments and your current level of borrowing are appropriate for your risk profile, financial resources and investment objective

• Don’t be fully leveraged

  • Borrow less than the maximum amount allowable in your account to avoid the risk of a margin call