How does daily futures settlement work when the futures are backed by bonds/bills?
How does daily futures settlement work when the futures are backed by bonds/bills?
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Andy · External communityPost link
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Author: Andy
Original post: https://money.stackexchange.com/questions/153539
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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I've got a futures account at ETrade which is backed by a normal trading account. If I put cash into the trading account it shows up as buying power in the futures account, and if I have a futures position, every day the futures account gets marked to market and cash is either added or deducted from my cash balance.
I recently used virtually all the funds in my trading account to buy T-bills, but afterwards (as in several days after) I noticed that my futures account is still showing the same buying power. If I were to enter into a futures position, how would the daily futures settlement work since there is virtually no cash in the account? I have done some searches but I have either found results on bonds/bills or futures or buying bond futures but nothing about settlement using the bonds/bills as collateral. Most sources just talk about cash as collateral for futures positions and don't mention bonds or bills, although the CME does mention accepting treasury notes and bills as collateral.
Does the answer change if I am fully collateralized versus just holding at least the maintenance margin as collateral?
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Myggen-- · External communityPost link
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Author: Myggen--
Original post: https://money.stackexchange.com/a/153541
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It sounds like ETrade considers T-bills to be equivalent to cash in terms of collateral. Remember that you are not settling your futures directly with CME (or any other exchange), your broker is trading on your behalf so everything is between your broker and the CME. So there doesn't have to be a 1-to-1 relationship between the collateral/cash that your broker provides CME and the collateral/cash that you provide your broker. In this case, ETrade can repo your TBills to get cash, and thus a TBill holding in your account is economically equivalent to holding cash.
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Quoted from Forex.com.bd-Editorial External question — Personal Finance Stack Exchange Author: Andy Source score (net votes, not local likes): 0 Original post: https://money.stackexchange.com/questions/153539 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I've got a futures account at ETrade which is backed by a normal trading account. If I put cash into the trading account it shows up as buying power in the futures account, and if I have a futures position, every day the futures account gets marked to market and cash is either added or deducted from my cash balance. I recently used virtually all the funds in my trading account to buy T-bills, but afterwards (as in several days after) I noticed that my futures account is still showing the same buying power. If I were to enter into a futures position, how would the daily futures settlement work since there is virtually no cash in the account? I have done some searches but I have either found results on bonds/bills or futures or buying bond futures but nothing about settlement using the bonds/bills as collateral. Most sources just talk about cash as collateral for futures positions and don't mention bonds or bills, although the CME does mention accepting treasury notes and bills as collateral. Does the answer change if I am fully collateralized versus just holding at least the maintenance margin as collateral?
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