As we head for another weekend of uncertainty around Greece, the markets are becoming more weary about upcoming volatility. Aside from the traders anxiously awaiting the resolution to the Greek crisis, risk-management teams are reassessing the exposure of brokers to increasing market risks.
Australian brokerage ThinkForex has just issued an announcement to its clients that it will be increasing the margin requirements over the weekend. While during the previous couple of weekends some brokers had opted to do the same, the Australian broker remained on the sidelines.
ThinkForex is increasing the leverage requirements on EUR and JPY to 2%
After a call by the U.S. and the International Monetary Fund (IMF) for a debt reduction for Greece, German chancellor Angela Merkel stated that a classic haircut is out of the question in the given case.
With the likelihood of a Grexit increasing, the volatility on the currency market on Monday could be substantial. ThinkForex is increasing the leverage requirements on all euro and Japanese yen pairs to a minimum of 1:50 or 2 percent. The move mirrors similar action by a number of other brokers prior to previous weekends.
Another point of worry is the situation on the Chinese stock market, where equities have been fluctuating up and down from five to ten percent on a daily basis. The company also announced that the AUD/USD and the GBP/USD pairs will also be subjected to a minimum margin requirement of 2 percent (1:50).
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The changes will be rolled out by ThinkForex at 16:00 GMT on Friday and will remain in effect until the currency market reopens on Monday morning.
The Euro zone’s finance ministers, known as the Eurogroup, will begin discussions on the matter of Greece remaining in the single currency area at 15:00 CET on Saturday. Expectations are that by then the Greek government will have presented its proposals for the attention of its creditors.
Liquidity may be significantly lower combined with higher volatility
The statement issued by ThinkForex on the matter reads, “Liquidity may be significantly lower combined with higher volatility meaning we encourage enhanced caution. In order to protect clients against significant moves, we have taken the decision to temporarily reduce leverage on some instruments.”
“Be mindful that if the market ‘gaps’ over the weekend it is possible for stop and limit orders to experience larger than normal slippage. We reserve the right to further modify trading limits or leverage ratios at all times in order to maintain a fair and reliable trading environment,” the statement concludes.
The changes to the margin requirements will affect both existing and new positions.