Event of Default

An event of default is the list, written into a client agreement, of things that count as the client failing under the contract. It is broader than not paying. Alongside failing to meet a margin obligation it typically includes a payment not arriving, a statement made at onboarding turning out to be untrue, documents going stale, insolvency or death, and, in most agreements, breach of any term at all — which makes the list open-ended by design. What follows is the reason to read it. On default the firm is generally entitled, without further notice, to close some or all positions at prices it determines, to stop accepting orders, to apply funds held in one account against a shortfall in another, to convert currencies in order to do so, and to terminate the agreement. None of that requires the market to have moved against the client; a document that expired can put an account into the same state as a margin shortfall, which is why the mundane administrative triggers are the ones worth knowing about in advance.