Futures Market Margin System Research

The future margin which is a guarantee of performing the future contract plays very important roll in keeping the future market running healthily. The margin system has been in existence since the beginning of our national future market, the market experienced many risk affairs and credit crisis because of the system default and loose supervision. In this case, it is common for the authority to raise the margin level to depress over-speculation and deal with the crisis. Although the margin system is the futures exchange's first line of defense against default risk, overcharge is of paramount importance to futures exchange. It is because the higher is the overcharge, the greater is the investor's opportunity cost of investing in the futures market. And how to calculate rational future margin is a critical part in continuously keeping the future market running healthily.This article produces three conclusions by comparing the future margin system in both national and abroad: Firstly, we should set up our national future margin system in reference of the way in England because our national future exchange doesn't have the character of non-profit and the exchange pursues trading volume and profits too heavily. Combining with our national condition, it is relative rational and more feasible to set up future market cleaning agency by participation of commercial banks ; Secondly, it can't match the future market volatility by the means of stationary margin ratio ,the margin ratio should be adjusted as the change in risk condition of future market. Thirdly, the exchange should collect future margin on a net position because it will reduce the occupancy of capital and the cost of investors. The article pays much attention on how to calculate the future margin ratio. To prevent from deadly loss and guarantee the liquidity of the future market, we establish VaR-GARCH model to calculate the margin ratio. The empirical research suggests that VaR-GARCH model is more effective than stationary margin ratio. We hope to offer some help to consummate our national future margin system.