Why is an additional margin charged for energy futures contracts close to expiry?
An extra margin is applied to energy futures and all other futures contracts as they approach expiry for safety reasons (Except Tradeable Index) . This precautionary measure is implemented by the exchange, initiating the margin increase five days prior to expiry. The escalation occurs in increments of 10%, 15%, 20%, and 25%. The rationale behind this is to mitigate the risk associated with physical settlement. Brokers must adhere to this margin adjustment to prevent any potential margin shortages and ensure a secure trading environment.