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As the title reads, why do some exchanges require participants to post margins for cash products? I do understand why they require margins to be posted for futures, but why for cash products like equities? For example, JSCC (Japan Securities Clearing Corporation) requires margins for cash products..

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The JSCC requires Margins to be posted for unsettled contracts As is explained here.

Initial Margin for Cash Products

In order to cover exposures for cash products, JSCC calculates the daily initial margin based on the following:

  • Mark-to-market value of each unsettled contract evaluated using the latest price

  • Expected loss based on the unsettled market value and price fluctuation of each >issue (1-day holding period, 250 day reference period, 99% confidence level)

These contracts are subject to the risk, that the other side might not fullfill it's obligations. The initial Margin covers that risk.

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