Brokers around the world have been increasing margin requirements on euro pairs or informing clients that changes might come at any moment due to Greek debt announcements. With negotiations between Greece and its reluctant financial backers continuing over the weekend, a large gap at market open is a possibility that anyone concerned with Risk Management
Risk Management
One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent.
One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent.
Read this Term has to examine.
Over the last couple of days the euro exposure has been subdued as traders stay on the sidelines
Once burned twice shy - When the Swiss central bank caused massive unexpected Volatility
Volatility
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
Read this Term, some brokers saw hundreds of millions of dollars vanish in seconds and the pain of Black Thursday is still felt in the industry. As such is the case, it is not surprising to see that brokers seem to take the Grexit danger of extreme volatility very seriously.
Providing an inside look at many risk management discussions going on around the world right now, Charalambos Psimolophitis, the CEO of FxPro shared his thoughts with Finance Magnates. He explained, “In view of a potential Grexit we have reviewed our exposure limits in euro related pairs and have made some adjustments to reflect the higher risk."
"However the last couple of days the euro exposure has been subdued as traders stay on the sidelines. In case of a Grexit, additional measures will be implemented, such as increasing the margin requirement for euro pairs to reflect the potential for increased volatility,” Mr. Psimolophitis explained.
Taking Actions
Alpari already issued an announcement on Thursday, warning its clients that they may have to face changes in trading conditions on their EUR/USD and EUR/JPY trades in relation to prospective market turbulence next week.
Today, FXCM notified its clients that the margin requirements on FXCM UK, AU and Markets branches will be updated, with margin on many euro pairs increased. Trading accounts will be adjusted at market close today (Friday, June 26) for FXCM clients.
There is probably no one left in FX who has taken a position on the EUR in relation to Greece and not been badly hurt.
Rakuten’s FXCM Japan Securities notified its clients today that a number of margin requirements will change on market open on June 29. Among the changes, maintenance margin for EUR/USD, EUR/JPY and EUR/GBP increased from $480 to $520 per a $10,000 exposure.
IC Markets sent out dire warnings to traders reminding them to check their exposure to euro pairs and margin levels prior to market close. Clients were asked to ensure that they are not over leveraging and have sufficient free equity to withstand a market gap.
XTB UK has informed clients of a possible announcement over the weekend related to Greece, that might have significant impact on volatility during incoming days, especially on the market open on Sunday, June 28th. Clients were requested to adjust their positions (particularly on European indices and currency pairs with EUR) to upcoming market conditions. Spread levels and limits on some instruments may be temporarily increased.
LiteForex has increased threefold its margin requirements for all EUR pairs. Clients were asked to note that high market volatility is expected today due to the Greek debt negotiations between Greece and the “troika” of creditors, currently taking place in Brussels. Hence margin requirements for EUR pairs will be increased threefold starting from 6 pm, Friday, June 26, 2015 till 9 am, Monday, June 29, 2015.
Changes to trading conditions around the market close tonight and the market open on Monday have also been announced by Cyprus-based brokerage MAYZUS. The firm's clients will only be able to execute "close" orders due to expected volatility around the early hours on Monday, when more clarity about a Greek deal is expected.
The brokerage will be temporarily switching all instruments into "close only" mode of operation starting from 22:30 GMT+3 tonight (26th of June 2015), until 00:30 GMT+3 on Monday (29th of June 2015).
No Winners
Simon Smith, Head of Research at FxPro, shared his analysis of the situation, “There is probably no one left in FX who has taken a position on the EUR in relation to Greece and not been badly hurt. That is even more so the case after this week, when we've moved from thinking a deal was just about done on Monday to once again going right to the wire today."
"Because we are so so close to that wire, I struggle to see the euro rallying significantly on a deal this weekend, if at all. The IMF payment is due Tuesday and it must be ratified by various parliaments, including Greece and Germany. Bottom line, not much good can come out of this, given just how late in the day it has been sorted and how near they are to not repaying the IMF. Greece needs further debt write-downs, so I don't see any winners," he concluded.
Brokers around the world have been increasing margin requirements on euro pairs or informing clients that changes might come at any moment due to Greek debt announcements. With negotiations between Greece and its reluctant financial backers continuing over the weekend, a large gap at market open is a possibility that anyone concerned with Risk Management
Risk Management
One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent.
One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent.
Read this Term has to examine.
Over the last couple of days the euro exposure has been subdued as traders stay on the sidelines
Once burned twice shy - When the Swiss central bank caused massive unexpected Volatility
Volatility
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
Read this Term, some brokers saw hundreds of millions of dollars vanish in seconds and the pain of Black Thursday is still felt in the industry. As such is the case, it is not surprising to see that brokers seem to take the Grexit danger of extreme volatility very seriously.
Providing an inside look at many risk management discussions going on around the world right now, Charalambos Psimolophitis, the CEO of FxPro shared his thoughts with Finance Magnates. He explained, “In view of a potential Grexit we have reviewed our exposure limits in euro related pairs and have made some adjustments to reflect the higher risk."
"However the last couple of days the euro exposure has been subdued as traders stay on the sidelines. In case of a Grexit, additional measures will be implemented, such as increasing the margin requirement for euro pairs to reflect the potential for increased volatility,” Mr. Psimolophitis explained.
Taking Actions
Alpari already issued an announcement on Thursday, warning its clients that they may have to face changes in trading conditions on their EUR/USD and EUR/JPY trades in relation to prospective market turbulence next week.
Today, FXCM notified its clients that the margin requirements on FXCM UK, AU and Markets branches will be updated, with margin on many euro pairs increased. Trading accounts will be adjusted at market close today (Friday, June 26) for FXCM clients.
There is probably no one left in FX who has taken a position on the EUR in relation to Greece and not been badly hurt.
Rakuten’s FXCM Japan Securities notified its clients today that a number of margin requirements will change on market open on June 29. Among the changes, maintenance margin for EUR/USD, EUR/JPY and EUR/GBP increased from $480 to $520 per a $10,000 exposure.
IC Markets sent out dire warnings to traders reminding them to check their exposure to euro pairs and margin levels prior to market close. Clients were asked to ensure that they are not over leveraging and have sufficient free equity to withstand a market gap.
XTB UK has informed clients of a possible announcement over the weekend related to Greece, that might have significant impact on volatility during incoming days, especially on the market open on Sunday, June 28th. Clients were requested to adjust their positions (particularly on European indices and currency pairs with EUR) to upcoming market conditions. Spread levels and limits on some instruments may be temporarily increased.
LiteForex has increased threefold its margin requirements for all EUR pairs. Clients were asked to note that high market volatility is expected today due to the Greek debt negotiations between Greece and the “troika” of creditors, currently taking place in Brussels. Hence margin requirements for EUR pairs will be increased threefold starting from 6 pm, Friday, June 26, 2015 till 9 am, Monday, June 29, 2015.
Changes to trading conditions around the market close tonight and the market open on Monday have also been announced by Cyprus-based brokerage MAYZUS. The firm's clients will only be able to execute "close" orders due to expected volatility around the early hours on Monday, when more clarity about a Greek deal is expected.
The brokerage will be temporarily switching all instruments into "close only" mode of operation starting from 22:30 GMT+3 tonight (26th of June 2015), until 00:30 GMT+3 on Monday (29th of June 2015).
No Winners
Simon Smith, Head of Research at FxPro, shared his analysis of the situation, “There is probably no one left in FX who has taken a position on the EUR in relation to Greece and not been badly hurt. That is even more so the case after this week, when we've moved from thinking a deal was just about done on Monday to once again going right to the wire today."
"Because we are so so close to that wire, I struggle to see the euro rallying significantly on a deal this weekend, if at all. The IMF payment is due Tuesday and it must be ratified by various parliaments, including Greece and Germany. Bottom line, not much good can come out of this, given just how late in the day it has been sorted and how near they are to not repaying the IMF. Greece needs further debt write-downs, so I don't see any winners," he concluded.
