Breaking: GAIN Capital Increases Margin Requirements on Pegged Currencies

According to an announcement sent out to clients of the company, GAIN Capital is set to increase margin requirements on a number of currencies. Starting with the fixed Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term rates, the changes will affect the Danish krone, the Hong Kong dollar and the Chinese yuanת where Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term will be reduced to 1:10 (10% margin requirement).

GAIN Capital explains in its client announcement that the change of policy is due to the recent decision made by the Swiss National Bank (SNB) on January 15th to stop defending the floor which it introduced in September 2011.

Special: GAIN Capital's CEO discusses post crisis forex market

A number of emerging market currencies have also been included on the list with the bulk of the changes concerning Eastern European currencies. The margin on the Czech koruna has been increased by GAIN Capital to 10%, while the Hungarian forint, the Polish zloty and the South African rand currency pairs will require 5% collateral (or 1:20).

The last currency which will get special treatment under new margin requirements is the managed float of the Singapore dollar. The margin requirement on pairs including the Singapore dollar will be raised to 5% (or 1:20). The country’s managed peg policy has recently been the cause for a substantial move in what is a generally quiet currency pair after the Monetary Authority of Singapore surprised markets.

The changes for clients of GAIN Capital will take effect after the market close on Friday, the 6th of February. Changes will impact existing and new positions.