It appears we are on the cusp of a rush by brokers to adjust trading conditions to meet the requirements of their risk management strategies. Central banks in major economies are taking bold moves to interfere with the open markets and oil prices are setting new lows unseen in a long time.
The military events in Ukraine, Western sanctions and the falling price of oil have all led to a collapse in the value of the Russian ruble. The central bank of Russia had to change its currency market intervention policy and the Moscow Exchange raised it margin requirements.
It is likely that a large proportion of traders are betting against the ruble for the long- term and brokers might face dangerous odds if they take an opposing position. The first broker to adapt to the situation was the Russian Forex Club which raised commissions on ruble pairs last week, citing risk management requirements. Yesterday, Cyprus-based broker, XM.com, notified traders that leverage on USD/RUB and EUR/RUB will be lowered to 1:50 starting today.
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Overall, the yen lost a third of its value due the stimulus. FXCM Japan was quick to respond and announced changes on margin requirements for certain CFDs, which took effect on November 10th.
If such steps evolve into a substantial trend, brokers may have to review their exposure to the yen and ruble, which is likely to result in increasing their margin.
It can also be argued that many short-term retail forex traders rely mostly on contrarian strategies, and therefore take positions that are more likely to benefit the brokers in the long-term if the market keeps its current momentum, hence they should seize this opportunity and increase leverage. Soon we shall soon how this plays out in reality.