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FAQ

Have a question? View our FAQ's Below

Frequently Asked Questions

Set out below are additional Frequently Asked Questions (FAQ’s) regarding MeriFX. These FAQ’s aim to answer some of the questions that have been raised to date. We intend to release additional FAQ’s. If you still have any questions please email us at: support@merifx.com.ng

Q. How do I log in to the Internet Trading Platform (ITP)?

Q. How do I deposit funds into my account?

Q. Where can I see my funds once deposited?

Your funding amount will appear as “Cash Balance” on the ITP.

Q. How much money is available for me to trade at any given moment?

This is given as your “Trading Resources” and is equal to: (Cash Balance + Open Position P&L – Margin in Use).

Q. What is Open Position P&L?

This is the net difference between your opening price and the current market price multiplied by stake on all of your open positions.

Q. What is Margin in Use?

It is the total deposit reserved on your account in order to run your open position(s).

Q. What is Spread Trading?

It is a margined investment which gives you the ability to speculate on whether the price of a financial market will rise or fall. There is no ownership of the asset itself, only a stake in the outcome of the difference between the opening price and the closing price. If you buy the spread, you are reasoning that the price will go up; whereas if you sell the spread your reasoning is that the price will go down.

Q. What is a Margined Investment ?

It is an investment where only a percentage of the total notional value of the investment is necessary to invest fully. If the total notional value of the trade is ?200,000 then using a spread trade as your financial medium you would only need to fund a percentage of that amount to trade, for instance 5%, which would equate to ?10,000. The clear benefit of spread trading is that for a small amount of margin you can control a much larger investment value.

Q. What is Spread?

It is the difference between the selling (bid) price and the buying (offer) price. The spread fully encapsulates all buying and selling costs. There are no commission charges whatsoever.

Q. What is Stake?

The stake is the per point amount in Naira terms of how much a client is willing to risk. The minimum stake size across all markets is ?200 per point. This means that you profit by ?200 for every point movement in a market in your favour and lose ?200 for every point movement against you (a point is equivalent to the �Trade Per�).

Q. What is the Trade Per?

You will find references to this in both the ITP under the Market Information button and also in the Market Information Sheets posted on the website. It is the relevant unit in the price of a market to which 1 point relates. In FX it is often the 4th decimal e.g. EUR/USD 1.3432; the Trade is per the ‘2’ and so a movement to 1.3452 would represent 20 points. If you see the “Stake” explanation above you will see that this is a per point value and so a stake of ?200 per point with a gain of 20 points represents either a profit of ?4000.

Q. What are Stop Loss & Limit Orders?

A stop loss as the name suggests is a risk management tool with the purpose of restricting the amount of loss that you are willing to accept on a trade � it is a trade closing order. A stop loss can be input into a deal ticket either at the time of the trade or it can be added later. For ease, it can also be inputted in terms of points away from your trade opening price or as the actual price level you wish the trade to be closed out.

A limit order is your take profit price level and, as with a stop loss, can be added at the time of a trade or after and is either expressed in points away from your opening price level or as the actual price level.For more information on these types of order including “Guaranteed Stops”, please see the ITP Guide.

Q. What are Orders to Open?

There are 2 types of orders to open, a stop and a limit. They are different from a stop loss & limit order as described above as these are designed to open a new trade rather than close an existing trade. Orders to open are used if you wish to trade either above or below the current market price. The market may or may not trade at your desired level but the benefit of such an order is that you don’t have to permanently monitor the price action to trade at your desired level.

Q. How do I place a Trade, Order to Open or adjust a Stop Loss/Limit Order?

You can do all of these directly via the ITP (see the ITP Guide) or you can call the dealing desk to get a quote on any market that you may have an interest in.

Q. How are orders executed?

When the price that we quote reaches the order level (our offer price if a buy order and our bid price if a sell order) the order will be executed automatically.

Q. How do I work out how much funds I need to open a trade?

There are 3 components to this, your stake, the initial margin requirement and the spread. You decide the stake but the other 2 can be found in the Market information button next to any market on the ITP. The equation is:

Stake*(Margin factor + Spread)

You will need at least this amount in your Trading Resources in order to open your trade.

Q. What are the minimum and maximum trade sizes?

The minimum is $200.
There is no set maximum but we are happy to discuss so please call your account manager if you have a level in mind which is outside the norm.

Q. What is Orders Aware Margining

We run a system whereby we will allow the amount of margin to be reduced on any trade if you place a relatively close stop loss on that trade. The maximum amount needed to open any trade is given above in 16. The margin factor is the maximum amount of points which will be charged on any trade. If you place a stop loss inside the margin factor then the system reduces the margin requirement for that trade.

For example:

EUR/USD has a margin factor of 75pts so if you place a stop loss 50 pts away from your opening price your initial margin requirement is reduced as follows:

75pts*20%=15pts (This extra 20% of the margin factor is known as a �slippage factor�)

>15pts + 50pts = 65pts

>65pts*?200 = ?13000 margin required to open the position as opposed to ?15140 with no stop.

Q. What is a Margin Call?

A “Margin Call” is term used when you need to provide further funds to support open positions. When the ratio of your account Equity to required Margin falls below 100% you are on a margin call and will need to deposit funds in order to prevent the possibility of your positions being auto closed due to lack of funds. The Equity on your account is your Cash Balance + Open Position P&L. We will make best endeavours to email you at specific levels of a margin call, usually when the above ratio falls to 75%, 50% and 25%, however it is your own responsibility to manage your account and ensure that adequate margin is on deposit to maintain your positions. When the above ratio falls to 20% or below, we will automatically close ALL of your positions.

Q. What are the costs of Spread Trading?

As discussed above, the buy and sell costs are all contained in the spread. We do however pass on the small financing charges for holding positions open overnight including weekends and bank holidays.

Q. How are Financing Charges calculated?

Formula:

F = [(P/U) x S x I]/365

F = Overnight Financing

P = Closing Price

U = Unit Risk

S = Stake

I = Applicable interest rate [RFR +/- Financing Spread]

Applicable Interest Rate

The Applicable Interest Rate is the financing interest rate used to calculate Overnight Financing. The Applicable Interest Rate is calculated by taking the Relevant Financing Rate and adding or subtracting the Financing Spread.

Relevant Financing Rate (RFR)

The RFR is typically the benchmark cash rate of the country to which the currency of the Underlying instrument of the Spread Trade relates. For example, the RFR for a UK share Spread Trade is the Bank of England cash rate.

It should be noted that the RFR for an FX Spread Trade is different. The RFR for a FX Spread Trade is actually the interest rate differential between the two countries of the two quoted currencies in the FX pair (see below for more detail).

Financing Spread

The Financing Spread is the interest charged/paid by MeriFX above/below the RFR. Financing Spreads are listed in the Market Information Sheets.

Closing Price

In order to calculate the overnight financing, we use our marked-to-market Closing Price for that end of day.

Day Count

Overnight financing is calculated using a 365 day count.

Overnight Financing: Non FX products

Example of overnight financing on a Share trade

A client Buys ?1000 per Point of BG shares, which the client holds overnight. The Bank of England Cash Rate is 1%. The Closing Price for BHP is ?11.50. The Financing Spread is 2.5%. Using the equation above:

F = [(P / U) x S x I] / 365

Where Closing Price P=11.50, Unit Risk U=0.01, Stake S=1000. The applicable interest rate, I, is worked out as the Bank of England Cash Rate (1%), as it is a UK product, plus 2.5% as it is a Long Position, equalling 3.5%:

F = [(11.50/0.01) x 1000 x 3.5%]/365 = ? 110

This amount would be calculated after the close of business and ? 110 would be debited from the client�s account.

If you the client had sold ? 1000 per Point the above example instead of Buying, the calculation would differ due to a different valuation of I, the applicable interest rate. As it is a Short Position, I is worked out as the Bank of England rate (1%) minus 2.5%, equalling -1.5%. The calculation would be as follows:

F = [(11.50/0.01) x 1000 x -1.5%]/365 = – ? 47

This amount would be calculated after the close of business and ? 47 would be debited to the client�s account. It is important to note that this is a debit to the client�s account and not a credit. Despite the fact that the client has an open Short position and may expect a credit to the account it is actually a debit due to the fact that the Bank of England rate is so low at 1%.

Overnight Financing: FX products

Although the formula for calculating Overnight Financing (F) is the same for FX as it is for other asset classes, it is important to note that the RFR is the interest rate differential between the two quoted currencies.

When holding an FX Spread Trade there is an interest rate benefit in holding the Long currency and a cost in being Short of the other currency. MeriFX then subtract our Financing Spread, which is usually 2.5%.

For example, if a client goes Long AUD/USD and the Australian RBA cash rate is 4.5% and the US Fed Funds rate is 0.5% then the RFR will be 4.0%. Our Financing Spread is then subtracted irrespective of whether you are Long or Short of the Spread Trade.

FX example:

A client Buys ? 1000 per Point AUD/USD, which the client holds Overnight. The RBA rate is 4.5%, the Fed funds rate is 0.5% and the price of AUD/USD is 0.9258 at the time. Using the financing equation:

F = [(P/U) x S x I] /365

Where Closing Price P=0.9258, Unit Risk U=0.0001, Stake S=1000, applicable interest rate, I =[(4.5%-0.5%)-2.5%]/=1.5%, as worked out by taking the RBA rate 4.5% , subtracting the FED funds rate (0.5%) and then subtracting our Financing Spread of 2.5% as it is a Long Position:

F = [(0.9258/0.0001) x 1000 x 1.5%]/365 = ? 380

? 380 would be credited to the client�s account.

If the client had sold in the above example as opposed to Buying, the difference would be in the determination of I:

F = [(0.9258/0.0001)x 1000 x [(0.5%-4.5%)-2.5%]/365 = -? 1649

As this is a negative figure, -? 1649 would be debited from the client�s account.

Formula:

F = [(P/U) x S x I]/365

F = Overnight Financing

P = Closing Price

U = Unit Risk

S = Stake

I = Applicable interest rate [RFR +/- Financing Spread]

Applicable Interest Rate

The Applicable Interest Rate is the financing interest rate used to calculate Overnight Financing. The Applicable Interest Rate is calculated by taking the Relevant Financing Rate and adding or subtracting the Financing Spread.

Relevant Financing Rate (RFR)

The RFR is typically the benchmark cash rate of the country to which the currency of the Underlying instrument of the Spread Trade relates. For example, the RFR for a UK share Spread Trade is the Bank of England cash rate.

It should be noted that the RFR for an FX Spread Trade is different. The RFR for a FX Spread Trade is actually the interest rate differential between the two countries of the two quoted currencies in the FX pair (see below for more detail).

Financing Spread

The Financing Spread is the interest charged/paid by MeriFX above/below the RFR. Financing Spreads are listed in the Market Information Sheets.

Closing Price

In order to calculate the overnight financing, we use our marked-to-market Closing Price for that end of day.

Day Count

Overnight financing is calculated using a 365 day count.

Overnight Financing: Non FX products

Example of overnight financing on a Share trade

A client Buys ?1000 per Point of BG shares, which the client holds overnight. The Bank of England Cash Rate is 1%. The Closing Price for BHP is ?11.50. The Financing Spread is 2.5%. Using the equation above:

F = [(P / U) x S x I] / 365

Where Closing Price P=11.50, Unit Risk U=0.01, Stake S=1000. The applicable interest rate, I, is worked out as the Bank of England Cash Rate (1%), as it is a UK product, plus 2.5% as it is a Long Position, equalling 3.5%:

F = [(11.50/0.01) x 1000 x 3.5%]/365 = ? 110

This amount would be calculated after the close of business and ? 110 would be debited from the client�s account.

If you the client had sold ? 1000 per Point the above example instead of Buying, the calculation would differ due to a different valuation of I, the applicable interest rate. As it is a Short Position, I is worked out as the Bank of England rate (1%) minus 2.5%, equalling -1.5%. The calculation would be as follows:

F = [(11.50/0.01) x 1000 x -1.5%]/365 = – ? 47

This amount would be calculated after the close of business and ? 47 would be debited to the client�s account. It is important to note that this is a debit to the client�s account and not a credit. Despite the fact that the client has an open Short position and may expect a credit to the account it is actually a debit due to the fact that the Bank of England rate is so low at 1%.

Overnight Financing: FX products

Although the formula for calculating Overnight Financing (F) is the same for FX as it is for other asset classes, it is important to note that the RFR is the interest rate differential between the two quoted currencies.

When holding an FX Spread Trade there is an interest rate benefit in holding the Long currency and a cost in being Short of the other currency. MeriFX then subtract our Financing Spread, which is usually 2.5%.

For example, if a client goes Long AUD/USD and the Australian RBA cash rate is 4.5% and the US Fed Funds rate is 0.5% then the RFR will be 4.0%. Our Financing Spread is then subtracted irrespective of whether you are Long or Short of the Spread Trade.

FX example:

A client Buys ? 1000 per Point AUD/USD, which the client holds Overnight. The RBA rate is 4.5%, the Fed funds rate is 0.5% and the price of AUD/USD is 0.9258 at the time. Using the financing equation:

F = [(P/U) x S x I] /365

Where Closing Price P=0.9258, Unit Risk U=0.0001, Stake S=1000, applicable interest rate, I =[(4.5%-0.5%)-2.5%]/=1.5%, as worked out by taking the RBA rate 4.5% , subtracting the FED funds rate (0.5%) and then subtracting our Financing Spread of 2.5% as it is a Long Position:

F = [(0.9258/0.0001) x 1000 x 1.5%]/365 = ? 380

? 380 would be credited to the client�s account.

If the client had sold in the above example as opposed to Buying, the difference would be in the determination of I:

F = [(0.9258/0.0001)x 1000 x [(0.5%-4.5%)-2.5%]/365 = -? 1649

As this is a negative figure, -? 1649 would be debited from the client�s account.

Q. Can I trade on the move?

We provide mobile trading for iPhone/iPad and Android devices. You are able to place trades, close trades, place new orders and edit existing orders, view charts and also access account information all on the move.

Q. How are Dividends and Corporate Actions treated in Spread Trading?

If there is any dividend or corporate action which affects the price of a market then we aim to pass this on the holder of the spread trade to replicate exactly what happens in the underlying market. The only difference is that we pay a net dividend amount (80% on long positions) and the client if short will pay the gross amount (i.e. 100%). The reasons are that there are applicable taxes and administration charges that fall due on us as a company

Q. How do I withdraw funds from my account?

Q. If I cannot trade online for any reason what should I do?

We operate a 24hrs manned dealing desk 5 days a week. Please call us and we will be happy to assist you with any trading, orders, position and account management. If there is a problem with any trade you must call us immediately for us to be able to help you.

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