Beware of Margin Calls at Market Open During Night Trading! FSC Advises Using SMS Alerts and End-of-Night Simulated Calculations

Amid recent volatile global markets, the high leverage nature of futures trading has significantly increased account risks. On the 21st, the Financial Supervisory Commission (FSC) warned that although night trading includes exempted products such as Taiwan Stock Index Futures and Taiwan Index Options—where forced liquidation (offset) is waived and margin calls are not mandatory—investors who fail to monitor their margin levels still face the risk of being liquidated at the opening of the next day’s daytime session. To address this, the FSC is promoting two key services: SMS risk alerts and end-of-night simulated margin calculations, helping investors monitor their financial positions early and top up margin in advance to avoid forced liquidation at market open.

Recently, South Korean stocks have experienced sharp fluctuations, even triggering circuit breakers, while U.S. markets have also seen dramatic swings. Huang Hou-Ming, Deputy Director of the Securities and Futures Bureau, explained that the futures market operates in both daytime and night sessions. Under normal daytime trading, if an investor’s account margin falls below the maintenance margin (typically below 75% maintenance rate), futures brokers issue a margin call. However, during night trading, a "post-market waived forced offset" mechanism is currently in place.

When an investor’s account holds only exempted products such as Taiwan Stock Index Futures, Mini-TAIEX Futures, and Taiwan Index Options, futures brokers are not required to perform forced offsets during night trading, nor are they obligated to send standard high-risk margin call notices. Huang emphasized, "The absence of a margin call does not mean there is no risk." If market movements during night trading drastically reduce equity, and investors fail to monitor their accounts, they may face immediate forced liquidation at the next day’s market open if the risk indicator falls below 25%.

To strengthen risk warnings, the FSC is urging futures brokers to provide two key services. First is the SMS risk alert service: investors can pre-arrange with their brokers to receive SMS or app push notifications when their account holds only exempted products and equity during night trading falls below the maintenance margin.

While not an official "margin call," this measure serves as an early warning, giving investors time to top up margin via online banking before the daytime session opens, thus avoiding immediate liquidation.

Second is the end-of-night simulated calculation: brokers provide simulated account equity and maintenance margin figures based on night session closing prices—essentially a stress test—allowing investors to assess their margin status before the next day’s trading and adjust positions or add funds accordingly.

Officials noted that the SMS alert mechanism was implemented in early 2024, with no additional fees for registration. Currently, nearly 20 products—including Taiwan Stock Index Futures, Taiwan Index Options, and TSMC Futures—are covered under the waived forced offset category.

The FSC specifically reminds futures traders to continuously monitor the risks of open positions and changes in account equity, properly manage trading scale, and maintain sufficient margin. It also urges investors to use online channels to arrange SMS alerts with their futures brokers to protect their investment interests and support healthy market development.