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Calculations:  How to Calculate Interest on Balances

  

Do you have a question related to how interest is calculated on your account?

Please use the Inquiry Ticket or Live Chat system (located in the Support Menu of Account Management) for any account specific questions.

 

How do you calculate interest on cash and collateral balances?

 

 

Step 1

At the end of every day, PT looks at the following balances in each currency:

  • Cash balance in security account segment1 
  • Cash balance in commodity account segment1
  • Collateral balance for settled short stock positions

The collateral balance per short stock is calculated by multiplying the prior day's closing price by an adjustment factor based on the currency, rounding this value up, then multiplying by the number of shares.

 

For example, the collateral balance on a USD-denominated security would be:

Collateral Balance = (stock A prior day closing price x 102%, rounded up to the nearest 1.00) x (number of shares stock A) + (stock B prior day closing price x 102%, rounded up) x (number of shares stock B)

 

These balances are reported on the Daily Statement under Ending Settled Cash.

 

The adjustments utilized by PT are as follows:

(Please assume that the stocks are denominated in the currency listed on each line below - these are not stock symbols.  For example, USD-stock = USD denominated stock.) 

 

 

USD - stock – multiply by 102%, round up to nearest 1.00

CAD - stock – multiply by 102%, round up to nearest 0.50
EUR - stock – multiply by 105%, round up to nearest 0.01
CHF - stock – multiply by 105%, round up to nearest 0.01
GBP - stock – multiply by 105%, round up to nearest 0.01
SEK - stock – multiply by 105%, round up to nearest 0.01
AUD - stock – multiply by 105%, round up to nearest 0.01

HKD - stock – multiply by 105%, round up to nearest 0.01

 

 

Step 2

PT collects the overnight reference interest rate that will serve as the benchmark (BM) on which subsequent calculations are made. Learn more about these benchmarks here.

 

Step 3

PT calculates an Adjusted Cash Balance for the security sub-account by subtracting the short stock collateral value from the security sub-account Ending Settled Cash. Essentially, this pulls out the required collateral value derived from sales proceeds on short stock, since interest on these funds is calculated using different tiers.

Adjusted Cash = Ending Settled Cash - Short Stock Collateral Value

 

Step 4

For each of the three adjusted balances (adjusted security, commodity and short stock), we calculate how much money should be applied to each rate tier (see tier tables). Finally, we calculate the interest using the applicable rates (also from the tier tables):

 

The number Of Days In Year are based on industry standards for money market activity.

  • 365: GBP, HKD, KRW, ILS, INR, NZD, SGD
  • 360: USD, CAD, EUR, CHF, JPY, AUD, SEK, NOK, DKK, HUF, MXN
 

 

Interest =

 

( Balance tier 1 * Rate tier 1 / Number of Days In Year )

  ( Balance tier 2 * Rate tier 2 / Number of Days In Year )
  ( Balance tier 3 * Rate tier 3 / Number of Days In Year )
 

Etc.

 

Please Note:
  1. Please see Universal Account section of the Margin Overview page for description of account structure. Due to the different regulators -- CFTC for commodities and SEC for securities -- PT is not permitted to net the assets in a sub-account with those from the other sub-account.
  2. The new accrued cash shown after the above postings may not be zero. The residual balances reflect the continuing accruals for the first days of the current month. For example, if PT processes the final interest calculation on August 6, Accrued Cash will still show the activity from August 1 through August 6. 
  

 

Interest Charged to You on a Negative Cash Balance & Interest Paid to You on a Credit Balance

Interest Paid to You on Short Sales (Visit Examples Page)

Learn about Interest Rates (Basic)

 

 

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