As one of the licensed brokerage houses in the region, ADCB securities offers margin trading facilities to its customers on stocks traded in the DFM (Dubai Financial Market) and ADX (Abu Dhabi Securities Exchange) markets.
The Margin Trading account is the one through which the brokerage company finance the investor to buy the securities in this account taking the securities available in the Margin Trading account as a security or any other guarantees allowed by the Regulations. The Margin Trading account enhances the investor’s purchasing power, however, renders the investor vulnerable to losses.
How the Margin Trading Transaction is processed?
Presumably, you wish to buy a share for AED 10/- and the share value jumps for AED 15/-. If you bought this share through your cash account i.e. full value was paid, then you should have generated 50% worth profit. However, if you bought this share through the Margin Trading account, you must have paid AED 5/-. Then you should have generated a profit equal to AED 5/- i.e. 100% worth profit.
If the share price drops and if you bought this share through the cash trading account, value of which was fully paid, you shall incur 50% loss. But if you bought this share through the margin trading account, your loss shall be 100%, in addition to the commissions and charges i.e. the loss upon margin trading shall be bigger.
From time to time the investor may be required to feed the margin trading account by injecting fresh funds or securities, if the value of the purchased share in the margin trading account drops.