Calculation of the Compensation Amount

Scenario 3 - Futures trading

Mr. Wong trades Hang Seng Index ("HSI") futures contracts:
Mr. Wong bought 8 HSI futures contracts when HSI was 27,000 and the margin required is HK$800,000 (assume HK$100,000 per HSI futures contracts)
Assume ABC Brokerage Firm defaults on 2/1/202X, then the closing HSI on the default date is used to calculate the compensation amount:
  • HSI closes at 26,700 on 2/1/202X

  • Each contract losses HK$15,000 (HK$50 for each index point) and total loss is HK$120,000 for 8 contracts

  • The balance of the futures contract margin is HK$680,000 as at the default date.

Mr. Wong should receive a compensation amount of HK$500,000.

A claimant would receive a maximum compensation amount of HK$500,000.