Each trading customer must deposit funds with the FCM before he can trade. The funds are known as a margin deposit, and represent a performance bond to insure the customer fulfils his obligation on the futures contract. The margin money can be of two kinds, a direct deposit or a replacement deposit. In either case, once the customer deposits his margin with the FCM (clearing participant), the clearing participant must pass it on to JCCH, according to JCCH procedures.
            The clearing margin deposit must be by cash or negotiable securities. In the case of negotiable securities, they must be securities approved for margin deposit by JCCH.

1. Direct deposit
            The direct deposit refers to the margin deposited (pledged) to the clearing participant (FCM) by the customer, and which is passed on to JCCH for credit to the FCM's clearing account. These amounts represent the appropriate margin deposit for the commodities being traded.

2. Replacement deposit
            The replacement deposit refers to the clearing margins (cash or negotiable securities) received from customer in excess of minimum JCCH requirements and deposited with JCCH. It is held on account for the clearing participant, and therefore must satisfy these requirements:

(a) Consent from customer:
            When clearing participants (the FCM's) receive the margin deposit from customers, it is necessary to obtain the consent of the customer to deposit all funds with JCCH in the account of the clearing participant. This consent must be obtained on the proper JCCH form (electronic filing permitted).

(b) Treatment of negotiable securities deposited as margin:
            Negotiable securities will be acceptable as margin deposit, subject to certain amount of "haircut" or discount to market value, as determined by JCCH.

            In reference to all margin deposits made by the customer to his clearing participant (direct deposit), the customer has a claim of refund for those deposits when no longer holding a trading position warranting such deposits.

            When a customer deposits margin to his clearing participant, and the clearing participant deposits to JCCH amounts larger than the margins deposited by its customer (replacement deposit), the customer has the right to claim a refund directly to the clearing participant, except in the case of a default when the customer has a claim of refund directly to JCCH.

            The clearing participants are required to deposit the following margins to JCCH and JCCH will manage these deposits by classification.