Futures and Options Brokerage Service

Under the TCH s clearing rules, all traded futures contracts must be cleared and settled on the next business day (T+1). Each futures contract traded on the TFEX will be marked to the market daily based on the futures settlement price.

An investor is required to maintain a margin account with a broker and a clearinghouse member is required to maintain a margin account with the clearinghouse. The clearinghouse will stipulate the margin rate and then will re-evaluate the margin requirements for each member s base on a daily basis.

For a client, when opening an account to trade futures, a broker will ask an investor for an initial deposit to cover the initial margin for each contract to buy or sell. At the end of each day, the broker marks-to-market the investor s open futures positions. This is the process by which the broker will add and/or deduct gains and losses from the account s balance. If client s margin deposit falls below a certain level (as determined by the broker) the broker will then ask the investor to deposit additional money into the account to bring the margin back up to the required minimum. This is called a variation margin. In the event that the client has made a profit from his/her futures position, the client is then able to withdraw the money from the account.

Thailand Clearing House (TCH) has in place a margining system that requires each broker to deposit margin with the TCH while investors are required to deposit margin with the brokers. The margin rate set by TCH is to minimize the counterparty risk to traders, trades executed on TFEX are guaranteed by a clearing house. The clearing house becomes the buyer to each seller, and the seller to each buyer, so that in the event of a counterparty default the clearer assumes the risk of loss.

TCH uses the historical data of futures contract dated back 120 days to calculate the volatility of each instrument. The calculation uses a weighted average method where the most recent data are given more weight than the less recent data. This will ensure that the margin rate calculated from the volatility best represents the current market situation.

This is an ongoing process so TCH may announce a change in margin rate when deem necessary.